Key Takeaways
Why are ETF investors getting cautious?
Investors adopted a wait-and-see approach amid macro uncertainty.
Will ETF inflows improve in the third week of October?
Most probably, especially if there is a U.S.-China tariff deal.
Institutional appetite for crypto has been mixed amid the ongoing U.S. government shutdown.
After massive inflows in the first two weeks, the third week starts off with macro uncertainty and soured sentiment post-Friday flash 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.
Over the period, Spot Bitcoin [BTC] ETFs attracted a massive $3.24 billion in Weekly Inflows.
The spot demand lifted BTC price from around $113K to a new time high of $126K.
Source: Soso Value (Spot BTC ETF weekly inflows)
In the second week of the shutdown, some began booking profits from the rally, but Spot BTC ETFs attracted another massive $2.7 billion in Weekly Net Inflows.
But the new China-U.S. tariff update on the 10th October hit the markets and spoiled the party.
A mere $4.5 million in Daily Net Outflows were recorded on that day. But the news came after trading hours.
But the impact was absolute carnage. The liquidation cascade, escalated by depegging issues on Binance, triggered a panic sell-off that dragged BTC sharply below $110K from $122K in minutes. That was about a 10% drop for BTC.
ETH slammed twice as hard. It slipped from $4.3K to $3.3K, a 20% dip, before stabilizing above $3.7K on the Binance exchange.
ETH ETF inflows slow down
In the first half of October, U.S. spot ETH ETF investors bought over $1.7 billion, but amid the macro uncertainty and a liquidation cascade, they have sold nearly half a billion ($428 million in weekly outflows in week 3).
Source: Soso Value
Although the U.S. softened its stance on China and slightly boosted the market, the odds of reaching a deal by early November have decreased from 84% to 77%, capping BTC price below $115K.
According to crypto trading desk QCP Capital, Beijing’s reaction could determine investors’ next move.
At the same time, the U.S. government shutdown could extend to late October or early November, per prediction site Polymarket.
Although the market expected another 25 bps rate cut in the next Fed decision in late October, the delayed macro prints due to the shutdown could add to the volatility.
That being said, traders’ confidence could be boosted if BTC reclaims $115K, which doubled as a short-term cost basis and a crucial level for previous recoveries.
Source: CryptoQuant
Another investor relief was that an alleged ‘Trump whale’ has closed his $500M BTC short position, further underscoring that the macro uncertainty on the tariff front could taper.