Bitcoin ETF Inflows Reverse as Fed’s Hawkish Tone Cools Market Momentum

After a week of steady inflows into spot Bitcoin exchange-traded funds (ETFs), the tide turned on Thursday as the Federal Reserve’s hawkish messaging sent ripples through risk markets. Investors pulled back from crypto-linked products for the first time in eight days, reflecting a shift in sentiment amid signals that fewer interest rate cuts are on the horizon.

Market Context: The Fed’s Shadow on Risk Assets

The Federal Open Market Committee (FOMC) reiterated its cautious stance, indicating it expects fewer rate cuts in 2026 than markets had previously priced in. Treasury yields firmed and the U.S. dollar index (DXY) climbed, creating headwinds for speculative assets.

Bitcoin (BTC), which had been trading near $63,000 earlier in the week, slipped 2.1% to hover around $61,800 in Thursday’s session. Ethereum (ETH) followed, losing 1.6% to trade at $2,430. The reversal in ETF flows underscored how sensitive crypto demand remains to macroeconomic conditions, particularly central bank policy.

ETF Flows: From Accumulation to Hesitation

Spot Bitcoin ETFs had absorbed nearly $1.2 billion in net inflows over the previous seven trading sessions, according to data from Farside Investors. On Thursday, however, they recorded $142 million in net outflows, led by the Fidelity Wise Origin Bitcoin Fund (FBTC), which shed $68 million.

The change in direction was significant: inflows had been cited as one of the main drivers behind Bitcoin’s recovery from its August lows below $58,000. With investors now reassessing their risk tolerance, the ETF pipeline is showing its first signs of fatigue since late August.

Investor Sentiment: A Fragile Balance

The psychology of crypto investors often oscillates between “fear of missing out” (FOMO) during rallies and heightened caution during drawdowns. Analysts suggest that the Fed’s cautious tone may have tipped the balance toward risk aversion, at least temporarily.

“ETFs remain a powerful tool for mainstream exposure to Bitcoin, but macro conditions still dominate investor decision-making,” said Marco Santini, a digital assets strategist at Alpine Research. “Until we see more clarity on the Fed’s path, inflows will likely be choppy rather than consistent.”

Broader Market Implications

Altcoins also mirrored the cooling sentiment. Solana (SOL) fell 3.4% to $138, while Ripple’s XRP slipped 2.7% to $0.52. The sell-off was less severe than in equities, where the Nasdaq Composite declined 1.3%, but enough to remind investors of the correlation between crypto and traditional markets when monetary policy uncertainty looms.

Despite the day’s outflows, institutional engagement in digital assets remains on an upward trajectory. BlackRock’s iShares Bitcoin Trust (IBIT), for instance, still commands over $20 billion in assets under management, underscoring the growing legitimacy of crypto ETFs even amid volatility.

Looking Ahead: Macro Meets Momentum

The next test for Bitcoin and its ETFs will likely hinge on economic data releases in the coming weeks, including U.S. inflation and jobs reports. Should inflation show further moderation, pressure on the Fed may ease, potentially reviving risk appetite.

For now, the market’s message is clear: while ETFs have created a new gateway for capital flows into Bitcoin, macro policy continues to hold the stronger hand. Investors eyeing long-term opportunities must balance enthusiasm for digital assets with a sober awareness of central bank realities.