Bitcoin ETFs crushed by billions in outflows as Treasuries stifle interest-rate cut hopes
It's getting tough for crypto bulls.
Crypto exchange-traded products (ETPs), including ETFs, have fallen out of favor with investors as the U.S. Treasury market signals higher-for-longer interest rates.
Digital asset investment products recorded $1.47 billion in outflows last week, the second consecutive week of redemptions and the third-largest weekly outflow of 2026, according to CoinShares.
Bitcoin BTC$76,987.42 funds led the charge, dropping $1.32 billion in their largest weekly outflow of the year. The 11 U.S.-listed spot bitcoin ETFs alone witnessed an outflow of $1.26 billion last week, following the preceding week's $1 billion exodus. Investors pulled $223 million from ether (ETH) funds.
Other altcoin ETFs also experienced a material moderation in flows.
"Cumulative outflows over the two weeks now stand at US$2.54bn, suggesting the Iran-related risk-off has deepened and broadened despite continued CLARITY Act progress," James Butterfill, head of research at CoinShares, said in a report shared with CoinDesk.
The outflows occurred as bond-market traders ramped up bets that the Federal Reserve will keep interest rates higher under new Chairman Kevin Warsh.
Their positioning is evident from the section of the Treasury market curve, identified by the difference between two- and 10-year yields, which grew by over 12 basis points last week.
The two-year yield is more sensitive to interest-rate expectations, so the widening of the spread, driven by a faster rise of the two-year yield, implies expectations of elevated borrowing costs over the near term. Similarly, the gap between five- and 30-year yields also widened, flashing similar expectations.
Elevated interest rates often disincentivize riskier asset classes, especially weighing on emerging technologies like cryptocurrencies and zero-yielding assets like bitcoin.
Taken together, the outflows and yield curve signals paint a bearish picture for risk assets. Investors may be redeploying capital into impending IPOs, especially SpaceX, which could be the biggest ever, and into commodities, which are rallying amid disruptions to oil flows through the Strait of Hormuz.
Forthcoming U.S. inflation data releases, including the Fed’s preferred gauge, core PCE, due on Thursday, could clarify the market trajectory. Stay alert!
Read more: For analysis of today's activity in altcoins and derivatives, see Crypto Markets Today . For a comprehensive list of events this week, see CoinDesk's "Crypto Week Ahead."
