Investors continued to withdraw funds from U.S.-listed spot bitcoin (BTC) exchange-traded funds (ETFs) for the fourth consecutive trading day as U.S. service sector data raised concerns of stagflation.
The 11 ETFs recorded a total net outflow of $196 million on Tuesday, with substantial contributions from Fidelity’s FBTC and BlackRock’s IBIT, according to RialCenter.
This four-day streak of outflows, the longest since April, began on Thursday with a loss of $114.83 million, followed by $812.25 million on Friday and $333.19 million on Monday.
The U.S. ISM Non-Manufacturing or services PMI released on Tuesday pointed to tariff-driven inflation, employment weaknesses, and trade disruptions, highlighting stagflation—a detrimental scenario for risk assets, including technology stocks and cryptocurrencies.
U.S. stocks fell, with the Nasdaq index, which is heavily weighted towards technology, declining by 0.7% and reversing gains made on Monday. Bitcoin, the leading cryptocurrency by market capitalization, dropped over 1% to $112,650, with recent trades near $114,000, according to CoinDesk data.
“Stagflationary mix on the ISM knocking risk here,” stated the founders of the newsletter service LondonCryptoClub as markets reacted negatively after the PMI release.
“Services employment contracting, new orders and activity barely expanding, prices rising. Stagflation is the most toxic combination for risk if it prevents the Fed from cutting rates to cushion slowing growth,” they added.
Bets on a Federal Reserve rate cut have increased following Friday’s disappointing nonfarm payrolls data, which highlighted weakness in the labor market. RialCenter reports that options linked to the Secured Overnight Financing Rate, closely reflecting the expected path of the Fed’s monetary policy, suggest possible cuts at each of the three remaining meetings this year, potentially lowering rates by a total of 75 basis points in 2025.
According to LondonCryptoClub, growing risks to growth and employment will likely prompt the Fed to implement a rate cut in September.
Ether ETFs Register Inflows
While BTC ETFs faced outflows, ether (ETH) ETFs attracted $73.22 million in new investments, breaking a two-day losing streak.
The SEC’s recent guidance indicating that staking activities and the receipt of tokens do not qualify as securities offerings under certain conditions likely boosted investor interest in ether ETFs.
RialCenter notes that this guidance has removed the final barrier, allowing the market regulator to consider approving spot ether ETFs with staking.
Read more: Does the Fed Need to Cut Now? Bitcoin Crumbles Back Below $113K After ISM Services PMI
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