Spot BTC, ETH ETFs see outflows as inflation ticks up under Trump tariffs
News Summary
Spot Bitcoin (BTC) and Ether (ETH) ETFs experienced outflows on Friday following the Federal Reserve's release of inflation data, which indicated rising price pressures under President Trump's trade policies. According to SoSoValue data, Ether ETFs saw a net outflow of $164.64 million, reversing five consecutive days of inflows totaling over $1.5 billion. Bitcoin ETFs also turned negative with $126.64 million in net outflows, marking their first daily loss since August 22. Total assets under management for Ethereum dropped to $28.58 billion and for Bitcoin to $139.95 billion. Fidelity’s FBTC recorded the steepest single-day outflow among Bitcoin ETFs at $66.2 million, followed by ARK Invest and 21Shares’ ARKB with a $72.07 million net withdrawal. Grayscale’s GBTC saw $15.3 million exit. Only a few funds posted minor inflows, with BlackRock’s IBIT gaining $24.63 million and WisdomTree’s BTCW adding $2.3 million. The outflows coincided with the release of the Fed’s preferred inflation gauge, the core Personal Consumption Expenditures (PCE) index, which showed a 2.9% annualized rise in July, the highest since February. This report, which matched forecasts, came amid growing evidence that Trump’s tariff regime is adding pressure on core prices by raising import costs, according to CNBC.
Background
Donald J. Trump was re-elected US President in November 2024, and his administration has continued and deepened its tariff-based trade policies, aimed at protecting domestic industries and reducing trade deficits. These policies typically involve a baseline tariff on all imports, with additional duties targeting specific categories. The Federal Reserve (the Fed) is the central bank of the United States, with a dual mandate to maintain maximum employment and price stability. The core Personal Consumption Expenditures (PCE) index is the Fed's preferred inflation gauge, as it excludes volatile food and energy prices to measure underlying inflationary pressures. Spot Bitcoin ETFs received approval in early 2024, providing a regulated avenue for institutional and retail investors to gain exposure to Bitcoin through traditional brokerage accounts. Spot Ether ETFs launched in July 2024, further expanding the accessibility of crypto assets in traditional financial markets and attracting significant institutional interest and corporate treasury adoption.
In-Depth AI Insights
How do Trump's tariff-driven inflation policies intersect with Fed rate decisions and the short-term dynamics of the crypto market? - President Trump's tariff policies directly contribute to core inflation by increasing import costs, creating a complex dilemma for the Federal Reserve regarding rate cuts. Even with potential signs of labor market weakness, persistent inflationary pressures limit the Fed's policy flexibility. - For cryptocurrencies, traditionally viewed as an inflation hedge, their appeal may diminish when inflation is attributed to trade policy rather than purely monetary easing. Investors might perceive tariffs as an economic drag, leading to short-term sell-offs in risk assets, including crypto, rather than embracing them as an inflation hedge. - This scenario suggests the Fed may maintain a hawkish bias or proceed with extreme caution on rate cuts for the foreseeable future, potentially exerting sustained valuation pressure on high-risk assets like cryptocurrencies. Despite Friday's outflows, what do the long-term growth trends and corporate adoption rates for Ether ETFs signal? - While short-term market reactions to inflation data led to outflows, the strong underlying AUM growth of Ether ETFs (up 44% in August) since their launch, coupled with accelerating corporate treasury adoption (holding 4.4 million ETH valued over $19 billion), indicates deep institutional conviction in Ethereum's long-term value proposition. - This might reflect two strategies: institutions using short-term volatility as accumulation opportunities, or a disconnect between long-term strategic allocations and short-term, macro-sensitive trading flows. - This trend suggests Ethereum is transcending mere speculation, with its practical applications and value recognition deepening within enterprises, hinting at its further establishment as critical digital economic infrastructure. What are the long-term asset allocation implications of sustained, policy-driven core inflation for traditional asset classes (e.g., stocks, bonds) and emerging digital assets? - Persistent high inflation, driven by tariffs, poses a dual challenge for traditional asset classes: corporate profits may suffer from higher import costs and supply chain disruptions, while bond yields could remain elevated due to inflationary pressure, eroding fixed-income investor returns. This might prompt a re-evaluation of growth stock valuations and an increased focus on value stocks with pricing power or those that benefit from inflation. - For digital assets, while facing short-term selling pressure, the long-term proposition of Bitcoin and Ethereum as 'digital gold' or decentralized finance infrastructure might regain appeal if traditional fiat currencies continue to depreciate due to inflation. However, their performance will depend on how the market differentiates between monetary inflation and policy-driven cost-push inflation. - Investors may lean towards diversified allocations, including a portion in digital assets with real-world applications and strong ecosystems, to hedge against traditional market uncertainties, while also focusing on sectors and companies capable of effectively managing high-cost environments.