Exchange-traded funds (ETFs) for Bitcoin and Ethereum in the United States have experienced significant outflows in recent weeks, drawing attention across the financial sector. Data shows that throughout 2024, there have been only two weeks with net positive inflows into these crypto-based funds, while the remainder of the year has witnessed persistent capital flight. This trend appears to coincide with a notable shift of investor capital into international equity markets, bolstered by key macroeconomic developments influencing asset allocation decisions.
Crypto ETF Assets Plunge
Bitcoin ETFs, which recently boasted assets totalling $115 billion at their peak, have now seen holdings diminish to roughly $83 billion. The downturn is even starker for Ethereum ETFs, where asset volumes have slumped from $18 billion to around $11 billion. These substantial declines not only reflect waning enthusiasm for crypto assets among US investors but also signal significant capital withdrawals from the sector as a whole.
International Markets Attract Fresh Inflows
Amid the withdrawal from US crypto funds, international equity ETFs have attracted their highest capital inflows in years. In January alone, new investments in non-US global funds accounted for a third of all ETF inflows—an impressive figure, especially when measured against their total share of assets globally. This data suggests that capital is rapidly rotating toward overseas opportunities.
Market watchers emphasize that major institutional investors are now reducing their exposure to US growth-focused stocks and high-risk assets like cryptocurrencies. Instead, they are reallocating capital to foreign markets, lured by more attractive valuations and perceived opportunities abroad.
Contributing to this asset rotation are robust US employment figures, announced recently, which have driven up bond yields. Higher-yielding bonds are increasingly drawing investors’ interest, as they offer perceived safety and competitive returns, diverting attention from riskier or more volatile alternatives.
In this context, highly liquid and high-beta assets like Bitcoin and Ethereum—known for large price swings—tend to weaken when capital flows into perceived safe havens or yield-generating instruments. This reallocation underscores the shifting sentiment as investors seek shelter from market uncertainty.
At the beginning of 2024, crypto ETFs played a pivotal role in driving demand and accelerating price rallies in digital assets, with investors eager to capitalize on upward momentum. However, the current landscape paints a starkly different picture, as these very funds now appear to be acting as vehicles for widespread selling, rather than fueling new buying.
Analysts suggest that, as macroeconomic conditions tighten and the pace of asset rotation intensifies, continued outflows from crypto ETFs may exert further pressure on Bitcoin, Ethereum, and the broader cryptocurrency market in the short term. Potential for a rebound will likely depend on shifts in both investor appetite and economic indicators in the coming months.
