Published: January 14th, 2026
Bitcoin and Ethereum exchange-traded funds (ETFs) have spent the opening weeks of 2026 giving back almost everything they'd just gained. After flirting with renewed inflows, the two flagship crypto assets are now caught in a familiar downdraft: tightening financial expectations, an unaccommodating Federal Reserve, and investors reassessing how speculative assets fit into a higher-for-longer rate regime.
According to data from CoinShares, crypto spot ETFs shed roughly $1.3bn over four days, nearly all of the $1.5bn they had accumulated since January. Over the most recent full week alone, outflows totalled $454m. The abrupt reversal has erased much of the optimism that greeted the year's opening trades.
Bitcoin funds took the brunt of the hit, with $405m leaving long Bitcoin products in a single week. Even short-Bitcoin funds, which profit from falling prices, recorded modest outflows, suggesting a shift to caution.
Monetary policy is the likely culprit. Futures markets now imply a 95% probability that the Federal Reserve will leave interest rates unchanged at its late-January meeting. More telling is what has happened to expectations for March. Only a week ago, traders assigned a 44% chance to a rate cut. That figure has since collapsed to just over 26%.
For assets whose appeal rests on abundant liquidity and speculative appetite, these sorts of recalibrations hit hard . Bitcoin and Ethereum, despite growing institutional adoption, are still sensitive to the discount rate applied to distant or uncertain returns. When investors believe cash will stay expensive, the opportunity cost of holding non-yielding assets rises accordingly.
In a note accompanying the research, CoinShares attributed the change in sentiment largely to this shift in rate expectations. Crypto, its analysts noted, typically fares best when monetary conditions are loosening. The market, having briefly hoped otherwise, is once again being reminded that the Fed does not move on wishful thinking.
Bitcoin (BTC) has been relatively stable in the period, trading near $91,700 after a modest daily gain. But ETF flows often reveal sentiment earlier than spot prices. When institutional money pulls back, retail confidence tends to follow.
Not every digital asset suffered equally. While Bitcoin and Ethereum funds bled capital, several large altcoins moved in the opposite direction. XRP, Solana and Sui attracted inflows of $45.8m, $32.8m and $7.6m respectively over the same period.
This divergence suggests a rotation within crypto investment circles. Investors appear willing to tolerate risk, provided it is framed as idiosyncratic rather than macro-dependent. Altcoins, less tightly correlated with Federal Reserve policy and more closely tied to ecosystem-specific narratives, can occasionally benefit when Bitcoin loses its allure as a macro hedge.
Still, these inflows remain modest compared with the scale of Bitcoin ETF withdrawals. They look more like opportunistic reallocations than a vote of confidence in the sector's broader prospects.
For seasoned crypto observers, the current pattern has an air of déjà vu. In December 2024, crypto investment products experienced an even sharper reversal following a hawkish intervention by Jerome Powell, the Federal Reserve chairman. That episode began with strong inflows, $308m in a single week and much of it into Bitcoin and Ethereum funds. Within days, sentiment flipped.
A hawkish “dot plot”, signalling fewer rate cuts ahead, triggered a record $575m day of outflows, which soon swelled to over $1bn. Weekly inflows collapsed by more than 90%. Bitcoin, having touched a fresh all-time high above $108,000, promptly fell by nearly 12% over the following week.
It was a blunt lesson for traders. Crypto may have matured in market structure, but it remains highly responsive to the signals coming out of central banks. When Powell speaks, traders listen, and sometimes they sell.
That dynamic looks to be repeating itself, though on a smaller scale. The Federal Reserve did cut rates in mid-December, but paired the move with firm guidance that easing would be gradual. The message, as markets understood it, was that the era of effortless liquidity was not returning anytime soon.
That message sits uneasily alongside memories of last summer's exuberance. In August 2024, Bitcoin ETFs enjoyed one of their strongest weeks on record, pulling in $1.35bn. Total crypto fund inflows reached $1.44bn, pushing year-to-date figures to a then-record $17.8bn — far surpassing the previous peak seen during the bull market of 2021.
American investors accounted for the lion's share, contributing roughly $1.3bn of the total. Momentum built steadily. Mid-month inflows tripled from the prior week as funds turned positive after a short losing streak. Spot Bitcoin ETFs recorded a full week of daily inflows, capped by a single-day total exceeding $310 m— the strongest performance in over a month.
Ethereum, too, benefited. Funds tracking the second-largest cryptocurrency drew around $72m as investors positioned themselves ahead of the anticipated approval of spot Ethereum ETFs. Smaller tokens such as Solana and Avalanche enjoyed spillover interest, buoyed by broader bullish sentiment.
At the time, CoinShares cited easing inflation data in the United States and even the German government's liquidation of seized Bitcoin as factors that encouraged investors to “extend their crypto positions”. It was a reminder that favourable macro news need not be perfect — merely better than feared.
The recent outflows do not herald crypto's demise. Nor do they suggest a decisive break with traditional finance. If anything, they confirm the opposite. Bitcoin and Ethereum ETFs are behaving much like other risk assets. They rise when liquidity seems plentiful and retreat when it looks scarce.
For believers, this is progress. Crypto is now a full-fledged participant in global capital markets, subject to the same calculations about rates, returns and risk.
But participation comes at a cost. When the Fed blinks, crypto flinches. And until monetary policy loosens in earnest, investors may continue to treat digital assets as optional exposures; easily acquired, and just as easily abandoned.
