Crypto ETFs Shrink by Nearly $700M on Fed Rate Cut
Cryptocurrency exchange-traded funds are surging amid the volatility that has engulfed financial markets following the Federal Reserve’s interest rate cut announcement earlier this week.
Spot bitcoin ETFs, Gained more than 90% since receiving regulatory approval on Jan. 10, it posted a record outflow of $680 million on Thursday.
The price of Bitcoin has increased by more than 56% since November 5th presidential electionsbut at around $96,000 on Friday afternoon, the cryptocurrency is down about 10% from its December 17 peak of more than $107,000.
The question for investors and financial advisors will be whether the selloff is part of a long-term pullback or just the latest reminder of the volatility associated with crypto investing.
“Cryptocurrency selling has been wild over the past 48 hours, and all major cryptocurrencies have fallen sharply since Thursday,” said Said Israelov, founder. Israel Financial in San Francisco.
“This massive sell-off came on the heels of the Fed’s recent announcement of a slower pace of rate cuts in 2025,” he added.
Rick Edelman, founder and member of the Financial Professionals Digital Asset Council etf.com advisory boardreduced outflows for simple profit and withdrawals to fund year-end charitable contributions.
“I expect a bigger wave of profit taking after January 10, because that’s when ETF owners start converting their gains from short-term capital gains to long-term capital gains, radically reducing their tax liability,” he said will create a large buying opportunity for new investors and the cycle of price appreciation will resume.”
Edelman, who believes bitcoin will hit the $150,000 mark next year, expects “a repeat of 2024 in 2025, and the next year bitcoin will end at another huge, all-time high.”
Meanwhile, Noah Damsky, principal at Marina Wealth Advisors in Los Angeles, believes wild price swings and asset flow patterns are part of what people should expect when investing in crypto ETFs.
“Rapid sentiment shifts can change crypto prices dramatically,” he said. “In the absence of intrinsic value, emotion drives price, and that’s what worries me.”
Damsky said investing in crypto through ETFs is a classic example of emotional investing.
“FOMO is real on the way up, but the downside can be swift and sharp,” he said. :
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