US spot Bitcoin exchange-traded funds (ETFs) posted $462.7 million in weekly outflows, ending a three-week stretch of heavy investor demand.
The funds recorded withdrawals across all four trading sessions in the holiday-shortened week, marking their first weekly loss since mid-August.
SoSoValue data showed net withdrawals of $46.7 million Tuesday, the first trading day after the Labor Day holiday. Outflows accelerated to $120.2 million Wednesday and $282.6 million Thursday before easing to $13.3 million Friday.
The reversal remains modest compared with the preceding demand. Investors poured roughly $3.8 billion into the products over the previous three weeks as Bitcoin rallied briefly above $80,000, giving the cryptocurrency a steady source of buying during its August breakout.
That support has now stalled as the macro backdrop grows more difficult.
Ecoinometrics, a Bitcoin-focused research platform, said the run of negative sessions remains too short to establish a lasting reversal in ETF demand. But an extended streak would make it increasingly difficult for Bitcoin to hold above $75,000.
The concern is less about $462.7 million leaving the funds in isolation than what happens if the change persists. Spot ETFs have supplied significant marginal demand during Bitcoin's recovery, meaning sustained redemptions would remove some of the buying pressure that helped the cryptocurrency establish its latest trading range.
That question is becoming more urgent ahead of this week's Federal Reserve meeting.
Fed meeting raises the stakes for Bitcoin's $75,000 support
The Federal Open Market Committee meets Sept. 15-16 after hotter inflation and rising Treasury yields sharply reduced expectations for an easy policy outcome.
US consumer prices increased 0.4% in August and 3.4% from a year earlier, strengthening expectations that policymakers could raise rates. The benchmark 10-year Treasury yield approached 5% during the week before pulling back to about 4.93% Friday.
Higher yields complicate one of the investment arguments that has supported Bitcoin this year.
The so-called debasement trade rests partly on demand for scarce assets as investors seek protection against persistent inflation, expanding government debt and declining purchasing power. But rising interest rates increase the returns available on government bonds and raise the opportunity cost of holding Bitcoin, which generates no yield on its own.
Ecoinometrics said the debasement narrative can only offset tighter financial conditions for so long while interest rates continue climbing.
Bitcoin's price action late last week reflected that tension. The cryptocurrency slipped from about $77,000 toward $76,000, rebounded to around $79,800 and subsequently surrendered much of the advance.
The swings leave $75,000 as an increasingly important threshold. Bitcoin moved decisively above that area in August while ETF inflows accelerated. The market could soon have to defend the same level while those flows move in the opposite direction.
However, insufficient evidence still shows ETF investors are abandoning the rally. Last week's withdrawals erased only a fraction of the roughly $3.8 billion accumulated over the previous three weeks and may reflect investors reducing risk ahead of a major monetary-policy decision.
The Fed will announce its decision at 2 p.m. Eastern time Wednesday, followed by Chair Kevin Warsh's press conference 30 minutes later.
The first ETF prints after that decision should provide a clearer test. Renewed inflows would suggest the four-day withdrawal streak was largely pre-Fed positioning. Continued redemptions alongside elevated Treasury yields would leave Bitcoin attempting to defend its August breakout with substantially less support from the buyers that helped create it.
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