Key Takeaways
Why are ETF investors turning cautious?
Investors took a wait-and-see approach amid the macro uncertainty.
Will ETF inflows improve in the third week of October?
Most likely, especially if there is a US-China tariff deal.
Institutional interest in crypto has been mixed amid the ongoing US government shutdown.
After huge inflows in the first two weeks, the third week begins with macro uncertainty and deteriorating sentiment after Friday’s sudden crash.
Crypto ETFs Navigate Uncertainty?
In the first week of the shutdown, markets remained unfazed and became a catalyst as the debasement trade became more popular.
Spot Bitcoin during the period [BTC] ETFs attracted massive weekly inflows of $3.24 billion.
Spot market demand boosted the BTC price from around $113,000 to a new all-time high of $126,000.
Source: Soso Value (weekly inflows from spot BTC ETF)
In the second week of the shutdown, some began to book profits from the rally, but Spot BTC ETFs attracted another massive weekly net inflow of $2.7 billion.
But the new tariff update for China and the US on October 10 hit the markets and spoiled the party.
On that day, only $4.5 million in daily net outflows were recorded. But the news came after trading hours.
But the impact was absolute carnage. The liquidation cascade, escalated by unplugging issues on Binance, caused a panic sell-off that took BTC sharply below $110,000 from $122,000 within minutes. That was a drop of about 10% for BTC.
ETH hit twice as hard. It fell from $4.3K to $3.3K, a 20% dip, before stabilizing above $3.7K on the Binance exchange.
ETH ETF inflows are slowing
In the first half of October, US ETH ETF investors bought more than $1.7 billion in the spot market, but amid macro uncertainty and a liquidation cascade, they have sold almost half a billion ($428 million in weekly outflows in week 3).
Source: Sosowaarde
Although the US softened its stance towards China and provided some stimulus to the market, chances of reaching a deal in early November have fallen from 84% to 77%, leaving the BTC price below $115,000.
According to crypto trading desk QCP CapitalBeijing’s response could determine investors’ next move.
At the same time, the US government shutdown could extend into late October or early November, per forecast site Polymarkt.
Although the market expected another 25 basis point rate cut in the Fed’s next decision at the end of October; the delayed macroeconomic prints due to the shutdown could increase volatility.
That said, traders’ confidence could be boosted if BTC recovers $115,000, which doubled as a near-term cost base and a crucial level for previous recoveries.
Source: CryptoQuant
Another relief for investors was that a so-called ‘Trump whale‘ has Closed its $500 million short position in BTC, further underscoring that macro uncertainty on the rate front could be easing.