Bitcoin ETFs Bleed Nearly $1 Billion as Inflation and Rate Fears Mount

U.S. spot Bitcoin exchange-traded funds faced another challenging week, shedding a net $228.6 million as negative momentum accelerated across digital asset markets. This latest withdrawal follows a steep $681.1 million drain recorded the previous week, bringing total outflows to roughly $910 million over a rapid two-week stretch.

Trading activity proved volatile throughout the five-day period. Funds managed to secure a brief $175.7 million inflow on Tuesday, only to see those gains entirely erased a day later by $261.4 million in redemptions, marking the worst single session of the week. Following a modest $5.1 million inflow on Thursday, selling pressure resumed on Friday with an additional $82.4 million exiting the products.

Spot Bitcoin exchange-traded funds are financial instruments that hold actual Bitcoin and trade on traditional stock exchanges like ordinary shares. Introduced in January 2024, they allow investors to gain exposure to the cryptocurrency through standard brokerage accounts without holding the underlying asset directly. Cumulative net inflows since their launch stand at $57.3 billion, making them a primary gauge of institutional and retail sentiment.

Inflation Surprises Spark Selloff

The mid-week selling coincided with disappointing macroeconomic data releases. The consumer price index showed prices climbing 3.7% year over year in September, exceeding the 3.6% forecast. A hotter-than-expected producer price reading followed shortly after on Thursday.

These inflation readings revived market bets that the Federal Reserve may implement another interest rate hike. As inflation remains stubborn, central banks typically maintain higher rates, elevating Treasury yields and offering investors risk-free returns near 5% that compete directly with volatile assets like Bitcoin.

Liquidation Cascade and Cost Basis

The macroeconomic pressures took an immediate toll on crypto valuations. Bitcoin briefly slipped below $80,000 on Thursday, driving total liquidations of leveraged crypto positions to nearly $950 million over a 24-hour window, with bullish long positions accounting for roughly 90% of the total.

According to Nexo analyst Iliya Kalchev, the downward price movement also dragged Bitcoin beneath the estimated average cost basis of exchange-traded fund holders, which sits near $82,300. Bitcoin ultimately closed the week near $81,590, retreating from approximately $82,337 a week earlier.

Why it matters

The back-to-back weekly outflows have dragged October deep into negative territory. After opening the month with roughly $293 million in inflows, the funds are now down about $615 million for the month. Because institutional investors and financial advisers heavily utilize these products, daily flow data has transformed into an essential barometer for broader financial sentiment toward digital assets.

Furthermore, higher interest rates increase borrowing costs and strengthen the U.S. dollar, tightening the availability of cheap credit that leveraged cryptocurrency traders frequently rely upon. Ethereum and Solana exchange-traded funds also experienced negative flows throughout the month, demonstrating a broader risk-off sentiment across the sector.

What to watch

Market participants will continue to monitor upcoming macroeconomic data releases and Federal Reserve commentary for definitive clues on the trajectory of interest rates. Observers will also track daily net flows across spot exchange-traded funds to determine whether institutional buyers step in to defend key technical levels or if redemptions will persist as total net assets hover near $100 billion.