According to BI, BlackRock’s iShares Bitcoin Trust ETF (IBIT) experienced unprecedented outflows on Thursday, with investors withdrawing a record $333 million from the fund. This marked the largest single-day outflow since its inception last January, contributing to a three-day streak of losses, the longest in its history. This event comes as the cryptocurrency market, particularly Bitcoin (BTC), takes a pause from its recent meteoric rise.
The crypto rally was significantly propelled by Donald Trump’s election victory in November. Trump, known for his pro-crypto stance during his campaign, appointed several cryptocurrency advocates to key positions in his administration, which spurred Bitcoin to surpass the $100,000 mark for the first time in early December. The flagship cryptocurrency reached an all-time high of $108,268 on Dec. 17, boasting a 56.5% increase from Election Day, with IBIT appreciating by about 41% during this period.
However, the enthusiasm has waned since these record highs. Bitcoin experienced its first monthly decline since August, dropping by more than 3% in December. The outflows from BlackRock’s ETF began to escalate, with a previous record outflow of $189 million on December 24, before the latest record was set.
This cooling off in the crypto market isn’t isolated to BlackRock’s fund. Other Bitcoin ETFs have also seen significant sell-offs, with the collective group of a dozen such funds witnessing about $2 billion in net outflows since December 19. The shift in investor behavior can be partly attributed to the Federal Reserve’s recent actions and statements. The Fed’s decision to cut rates by 25 basis points, coupled with a more hawkish than expected outlook for future monetary policy, has tempered expectations for further monetary easing in 2025. Fed Chair Jerome Powell’s comments and those from other officials have introduced a degree of caution among investors, impacting the risk appetite that had previously fueled the crypto rally.
This scenario underscores the sensitivity of cryptocurrency markets to macroeconomic policy signals. The retreat from Bitcoin and related ETFs suggests a recalibration of investor expectations in light of potentially tighter monetary conditions than previously anticipated. While Bitcoin and other cryptocurrencies have historically shown resilience and the ability to bounce back from downturns, the current outflows highlight the need for investors to monitor monetary policy developments closely, as these can significantly influence market sentiment and the valuation of digital assets.
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