Following a period of strong capital inflows, Bitcoin’s exchange-traded funds (ETFs) witnessed a significant turnaround, resulting in record outflows.
Analysis of Bitcoin ETF Movement
Between September 27th and October 1st, eleven U.S.-based spot Bitcoin ETFs experienced a collective outflow of $242.6 million, marking the largest withdrawal in nearly a month. This followed a substantial $494.4 million influx initially witnessed at the end of September.
Among the most impacted ETFs was Fidelity’s FBTC, which accounted for $144.7 million in outflows. ARK 21Shares’ ARKB saw withdrawals of $84.3 million, while Bitwise’s BITB experienced an exit of $32.7 million. In contrast, BlackRock’s IBIT received a positive influx of $40.8 million, showcasing a mixed sentiment within the Bitcoin ETF space.
Causes Behind the Market Decline
The recent downtrend in the Bitcoin and cryptocurrency markets can be attributed to escalating tensions between Israel and Iran.
Iran’s retaliatory missile strikes following Israeli actions against Hezbollah have heightened market uncertainty, leading to significant sell-offs and market volatility.
This ongoing conflict has historically impacted Bitcoin, with previous drone and missile attacks by Iran resulting in an 8% drop earlier this year. As current reports suggest a potential worsening of the situation, the crypto market faces the risk of further negative repercussions.
Referring to the repercussions, precious metals analyst Jesse Colombo stated,
Ethereum ETFs Show Similar Patterns
Similar to Bitcoin, Ethereum ETFs also experienced a notable decline in capital flow. While Ethereum had not seen a consistent influx like Bitcoin, it recently faced significant outflows.
By October 1st, Ethereum ETFs collectively experienced outflows totaling $48.6 million. Grayscale’s ETHE led with the highest outflow of $26.6 million, followed by Fidelity’s FETh and Bitwise’s ETHW with $25 million and $9 million in withdrawals, respectively. Despite most Ethereum ETFs reporting neutral flows, 21Shares’ CETH and VanEck’s ETHV saw inflows of $1.2 million and $2.7 million, respectively.
Impact of Global Tensions
The geopolitical uncertainties in the Middle East didn’t just affect ETFs but also influenced the broader cryptocurrency market.
The global crypto market cap dropped by 4.10% to $2.17 trillion, with Bitcoin losing over 3% and Ethereum experiencing a sharper decline of more than 6% within a day. In contrast, traditional assets like gold and crude oil saw significant gains, with gold prices rising to $2,665 per ounce and crude oil hitting $72 per barrel.
Following Iran’s actions on October 1st, both bonds and the U.S. dollar strengthened, underscoring the wider market volatility amidst geopolitical unrest. Financial markets strategist consultant Li Xing from Exness aptly noted,
“The increasing tensions in the Middle East have driven investors towards the safety of gold, enhancing its appeal amid the prevailing market uncertainty.”