Bitcoin exchange-traded funds hemorrhaged $342.2 million Tuesday, ending a 15-day streak of inflows worth over $4 billion as Federal Reserve Chair Jerome Powell signaled the central bank will maintain its restrictive monetary policy stance amid lingering tariff concerns.
Fidelity's FBTC fund bore the brunt of the selling pressure with $172.7 million in outflows, while Grayscale's GBTC recorded $119.5 million in redemptions, per data from Farside Investors.
The reversal demonstrates the fragility of institutional appetite for crypto assets when confronted with the prospect of prolonged higher interest rates.
Speaking at a European Central Bank forum in Portugal, Powell acknowledged the Fed would have already begun cutting rates this year absent President Donald Trump's trade policies.
Asked directly whether rates would have come down in 2025 without the tariff threat, Powell replied, "I think that's right."
"In effect, we went on hold when we saw the size of the tariffs and essentially all inflation forecasts for the United States went up materially as a consequence of the tariffs," Powell said, explaining the central bank's pause since Trump returned to office in January.
The admission comes as Trump has continued his criticism of the Fed chair, calling Powell a "stubborn mule" and "stupid person" last Friday while demanding immediate rate cuts.
Powell has rebuffed such pressure, maintaining that premature easing could reignite inflation.
“A rest stop”
Meanwhile, market analysts cautioned against reading too much into a single day's flows, calling it “just a rest stop.”
"After almost $5 billion went into spot Bitcoin ETFs, it's no surprise that some investors are taking a step back to think things through, especially with the Fed hinting at holding off on rate cuts for a bit longer,” Shawn Young, chief analyst at crypto exchange MEXC, told Decrypt.
Tuesday's selling hit multiple funds with Bitwise's BITB posting $23 million in outflows alongside $27 million from ARK 21Shares' ARKB.
BlackRock's IBIT, which dominated the prior inflow streak with $3.8 billion or 81% of total flows, registered flat activity alongside four other major Bitcoin ETFs.
Bitcoin itself weathered the ETF turbulence, dropping a modest 1.3% to $105,859 in the 24 hours following Powell's remarks.
The world’s largest crypto has since recovered, trading at $107,822, up 1.3% in the last 24 hours, per data from CoinGecko.
Young attributed the “short-term outflows” to broader macro conditions, saying "higher rates for longer" naturally curb demand for riskier assets like Bitcoin.
Still, Ethereum ETFs posted positive inflows Tuesday, suggesting "that institutional investors aren't backing out, but are just being selective and positioning carefully based on overall market signals," Young told Decrypt.
"One day of out-of-the-ordinary trading in the ETF market doesn't negate billions of dollars that have already come in,” the analyst said.
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