On January 7, spot Bitcoin exchange-traded funds (ETFs) experienced a sharp drop in inflows as Bitcoin fell by 5%, driven by rising expectations of a more hawkish approach from the Federal Reserve.
Bitcoin Price Surge and Its Short-Lived Effects
Bitcoin, the world’s largest cryptocurrency, surged past $102,000, sparking renewed optimism among investors anticipating a market rally ahead of President-elect Donald Trump’s upcoming inauguration. However, the gains were short-lived as Bitcoin dropped by 5.7% within 24 hours, weighed down by rising U.S. bond yields and investor caution ahead of key economic updates.
Impact of Rising U.S. Bond Yields
The increase in bond yields has fueled expectations of a more hawkish stance from the Federal Reserve. Investors are now awaiting the Fed’s meeting minutes for more clarity on policymakers’ deliberations. Additional pressure on Bitcoin came from a U.S. Labor Department report revealing job vacancies had climbed to a six-month high, driven by growing demand in the services sector.
Sharp Drop in Bitcoin ETF Inflows
The falling Bitcoin price resulted in inflows of just $52.9 million across the 12 Bitcoin ETFs on Jan. 7, representing a 94% drop compared to the previous day. Notably, BlackRock’s IBIT was the only BTC ETF to record an inflow, drawing in $596.11 million, thus offsetting collective outflows from other Bitcoin ETFs.
The current volatility in the Bitcoin market and ETF inflows reflects the shifting sentiment among investors amid economic updates and anticipated policy decisions, such as the Federal Reserve meeting minutes and upcoming employment reports.
