Investors withdrew money from U.S.-listed spot bitcoin (BTC) exchange-traded funds (ETFs) for the fourth consecutive trading day as U.S. service sector data raised the stagflation bogey.
The 11 ETFs registered a cumulative net outflow of $196 million on Tuesday, with Fidelity's FBTC and BlackRock's IBIT accounting for the giant share of the tally, according to data source SoSoValue.
The four-day outflow streak, the longest since April, began on Thursday when the ETFs bled $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 showed tariff-driven inflation, employment weakness and trade disruptions, all pointing to stagflation, the worst outcome for risk assets, including technology stocks and cryptocurrencies.
The U.S. stocks dropped, with the tech-heavy Nasdaq index losing 0.7% to reverse Monday's gain. Bitcoin, the leading cryptocurrency by market value, fell over 1% to $112,650, and last changed hands near $114,000, according to CoinDesk data.
"Stagflationary mix on the ISM knocking risk here," founders of the newsletter service LondonCryptoClub said on X as markets dropped following the services PMI release.
"Services employment contracting, new orders and activity barely expanding, prices rising. Stagflation, of course, is the most toxic combination for risk IF it prevents the Fed being able to cut rates to cushion slowing growth," the founders added.
Bets on the Fed rate cut have risen since Friday's disappointing nonfarm payrolls data, which indicated labour market weakness. According to Bloomberg, options linked to the Secured Overnight Financing Rate, which closely tracks the expected trajectory of the Fed's monetary policy, indicate the possibility of cuts in each of the three remaining meetings this year, potentially bringing down rates by a total of 75 basis points in 2025.
According to LondonCryptoClub, rising risks to growth and employment will be sufficient for the Fed to cut in September.
Ether ETFs register inflows
While BTC ETFs registered outflows, ether (ETH) ETFs amassed $73.22 million in investor money, snapping a two-day losing streak.
The SEC's guidance that staking activities and the receipt of tokens, under certain conditions, do not constitute securities offerings likely galvanized investor interest in ether ETFs.
According to Nate Geraci, president of NovaDius Wealth Management, the guidance has cleared the last hurdle, stopping the market regulator from 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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