The way ETFs move the market during periods of risk is now really visible.
Last October, Bitcoin [BTC] ETFs outflowed billions week after week, matching BTC’s nearly 35% crash. This time, BTC ETFs (Exchange Traded Funds) have held up surprisingly well, even with macro jitters from the Middle East.
That said, after seven days of steady inflows, BTC ETFs have recorded outflows of around $250 million over the past two days, following the inflation report that dampened hopes for a near-term rate cut. The result? Bitcoin fell about 5.5% to $70,000 over the same period.
Looking at the bigger picture, ETF flows and BTC price action have clearly been moving largely in the same direction lately. However, the interesting thing is that Bitcoin did not cause these outflows. Instead, the inflation report and broader market sentiment were the triggers.
In other words, the bleeding in ETFs translates into BTC price movements, rather than Bitcoin movements causing ETF flows. From a technical perspective, this makes ETFs a solid indicator of short-term BTC movements. Currently, the signals are bearish as these outflows have pushed BTC lower.
Against that backdrop, what’s the latest from Morgan Stanley Bitcoin spot ETF filing with the SEC really tell us? Could it make BTC’s short-term swings even messier during risk periods, or could it actually become a bullish catalyst for the market?
Institutional flows and inflation concerns keep Bitcoin under pressure
The continued impact of macroeconomic headwinds on ETF flows is not the first this year.
In late January, the buildup to the FOMC coincided with massive outflows from Bitcoin ETFs. According to Farside Investors ten consecutive days of sales totaled a whopping $3 billion+, demonstrating how even a “no change” decision from the Federal Reserve led to risk aversion among institutional investors.
From a technical perspective, Bitcoin responded quickly.
During the same period of ETF outflows, BTC fell nearly 40% to form a local top around $97,000, a level it has yet to regain despite subsequent steady ETF inflows. This episode underlines how institutional flows and macro sentiment continue to determine key resistance and support levels for Bitcoin.
Now that Morgan Stanley’s Bitcoin spot ETF filing has been filed, the impact really depends on the macro settings at launch. Because ETF flows already fluctuate as the market moves, larger outflows certainly pose a real risk, especially with recent reports calls this an ‘eternal conflict’.
Meanwhile, ongoing economic tensions, from persistent inflation to diminishing chances of rate cuts, keep sentiment shaky institutional investors have already withdrawn pulled nearly $15 billion out of Bitcoin ETFs since early January, reinforcing risk-taking behavior.
Taken together, these factors suggest that crypto is likely to enter the second half of the year on a bearish basis, meaning any ETF launch could face headwinds unless macro conditions stabilize.
Final summary
- The outflows caused by macro reports translate directly into Bitcoin price movements, making ETFs an important short-term indicator.
- With $15 billion withdrawn from Bitcoin ETFs since January and continued uncertainty over inflation and rate cuts, every ETF launch, including Morgan Stanley’s, faces potential bearish pressure.