Spot Bitcoin (BTC) exchange-traded funds (ETFs) saw significant daily outflows of over $200 million as uncertainty around US inflation data gripped the market.

Investors reevaluate their positions in risk assets, including Bitcoin ETFs, as inflation fears grow. These developments highlight the intricate relationship between macroeconomic indicators and the crypto market.

Market Anticipation Drives Bitcoin ETF Sell-Off

SoSo Value data shows US spot Bitcoin ETFs recorded a daily net outflow of $200.31 million as of June 11. The Grayscale Bitcoin Trust (GBTC) and ARK 21Shares Bitcoin ETF (ARKB) were the hardest hit, with outflows of $121 million and $56 million, respectively.

Meanwhile, BlackRock’s iShares Bitcoin Trust (IBIT) recorded no flows during the same period.

This shift is notable, as these ETFs had been experiencing positive inflows since May 13. However, outflows began to occur starting on June 10, as market participants anticipated the release of the US May Consumer Price Index (CPI) data today.

Jesse Cohen, a Global Markets Analyst at Investing.com, highlighted the heightened market volatility surrounding the upcoming CPI report. He indicated that a cooler-than-expected CPI report could extend the ongoing market rally. It reassures investors about potential Fed rate cuts in the coming months.

“However, a surprisingly strong inflation reading could trigger market volatility, as it may delay expectations of a rate cut and raise concerns about inflationary pressures,” he added.

Research firm The Kobeissi Letter also weighed in. It noted the divided expectations regarding the CPI data. The firm pointed out that while major banks expect CPI inflation to come in at 3.4%, prediction markets indicate a 17% chance of inflation above 3.4% and a 41% chance below 3.4%.

“CPI inflation above 3.4% [today] would mean that inflation has risen 3 out of the last 4 months,” The Kobeissi Letter wrote.

Mixed economic signals further complicate the outlook for inflation and market performance. For instance, US firms added 272,000 jobs in May, and wages rose at an annual rate of 4.1%, while the unemployment rate ticked up to 4%. This paradox of rising employment and wages alongside increasing unemployment adds to the economic uncertainty.

Matthew Dixon, CEO of crypto rating platform Evai, highlighted the critical nature of the upcoming CPI and Federal Reserve meeting. He acknowledged the genuine risk of higher inflation, which would be positive for the dollar but negative for risk assets, including Bitcoin.

“It’s also possible we see CPI subside and dovish Fed resulting in a boost to risk assets,” he said.

However, Bitcoin’s price historically tends to rebound after FOMC announcements despite initial volatility. Pseudonymous crypto researcher Gumshoe noted this in his recent analysis.

“There have been 4 FOMC [meetings] in 2024. […] BTC dumped 10% in the 48 hours before all of them. On FOMC day, it recovered the entire move. The market always prices in overly bearish statements and then reverses,” Gumshoe outlined.

As the market braces for the impending inflation data, the spot Bitcoin ETF outflows show cautious sentiment among investors. The outcome of the US CPI report and the Federal Reserve’s subsequent actions will likely set the tone for market movements in the near term.

Source : BeInCrypto by Lynn Wang - Jun 12, 2024