Bitcoin ETF Outflows Surge After Binance Hack

Crypto ETFs See Significant Outflows Following Major Hack

The first substantial market reaction from ETF investors to the largest cryptocurrency hack in history has been decidedly negative. U.S. spot Bitcoin ETFs experienced outflows totaling $643.2 million on Friday, marking their largest single-day departure of October, according to data from Decrypt’s ETF tracker.

This significant outflow occurred during the funds’ first full trading session after attackers began draining approximately $6.4 billion from the cryptocurrency exchange Binance. The theft commenced at 4:05 p.m. ET on Thursday, after U.S. markets had already closed. Thursday’s inflows of $17.2 million predated the hack.

The selling pressure on Friday effectively erased a four-day streak of inflows that had accumulated $441 million. This leaves the Bitcoin ETFs with a net outflow of about $202 million for the week and approximately $516 million for the month of October. Cumulative net inflows since their launch have now dipped to $57.4 billion, with total net assets standing at $103.2 billion.

Ethereum and Solana ETFs Also Suffer

Ethereum and Solana ETFs fared even worse in proportion to their market size. Ethereum funds saw outflows of $155.7 million on Friday, extending a five-day streak of departures to roughly $431 million and pushing October losses for these funds to approximately $1.61 billion. Solana ETFs shed $10.8 million, marking their fifth consecutive day of outflows and totaling about $72 million for the week. These Solana-focused funds have only recorded net inflows on two days throughout the entire month.

Spot cryptocurrency ETFs are designed to hold the underlying digital asset, such as Bitcoin or Ethereum, and trade on traditional stock exchanges. This structure allows investors to gain exposure to cryptocurrencies through their standard brokerage accounts.

Investor Sentiment Gauge

Bitcoin ETFs have attracted $57.4 billion in net inflows since their debut in January 2024, while Ethereum ETFs have garnered $12.2 billion since their launch in July of the same year. Given that issuers report these flows daily and a substantial portion of the capital originates from institutional investors and financial advisors, these figures are closely monitored as a key indicator of investor sentiment in the crypto market.

Market’s Initial Resilience and Subsequent Reaction

Cryptocurrency markets initially appeared to absorb the news of the Binance hack with relative composure, considering the magnitude of the theft. Bitcoin saw a decline of about 4% on Friday, falling to approximately $76,400. More than $1.3 billion in leveraged positions were liquidated. While a significant drop, it was considerably less severe than the nearly 11% plunge experienced after a failed attack on Binance in 2018.

Binance has publicly committed to covering all losses using company funds and its emergency reserve. Additionally, stablecoin issuers Tether and Circle have frozen over $2.3 billion in stolen stablecoins. Some Wall Street firms even advised clients to consider purchasing crypto-linked stocks, anticipating potential market weakness.

By Saturday, Bitcoin had stabilized around $77,520, showing a 0.5% increase over the preceding 24 hours but remaining down 3.3% for the week. Ethereum was trading near $2,251, down 3.9% for the week, and Solana was priced around $96, down 4.5%. The total cryptocurrency market capitalization held steady at approximately $2.7 trillion.

Broader Economic Factors and Market Predictions

Persistent macroeconomic headwinds continue to influence the market. The Federal Reserve maintained its benchmark interest rate at 3.75% to 4% on Wednesday. However, two officials dissented, voting for a rate hike, and traders had priced in a greater than 70% probability of an increase in December.

On Myriad, a prediction market developed by Decrypt’s parent company Dastan, traders have adopted a bearish outlook on Ethereum and Solana. They now assign Ethereum a 51.3% chance of falling to $1,500 before reaching $3,000, a reversal from the previous week when the market favored an upside move with a 61.3% probability. The odds of Solana sinking to $40 before hitting $160 have risen to 53.7%.