Bitcoin and Ethereum ETFs Suffer Outflows as Crypto Markets Slump

The cryptocurrency market plunged on Wednesday as ongoing geopolitical concerns prompted heavy outflows from Bitcoin and Ethereum spot exchange-traded funds (ETFs).

Bitcoin (BTC) fell 1% to $60,350, while Ethereum (ETH) dipped 4% to $2,360. Solana (SOL) and Polkadot (DOT) dropped 3% and 2%, respectively.

Outflows from spot Bitcoin ETFs in the U.S. reached $242.6 million on Tuesday, the highest since September 3, according to Farside Investors. Most of these outflows came from the Fidelity Wise Origin Bitcoin Fund (FBTC), which lost $144 million, and the Bitwise Bitcoin Strategy ETF (BITB), which accounted for $84.3 million.

Ethereum funds followed a similar pattern. The Fidelity Ethereum Fund (FETH) reported outflows exceeding $25 million on Oct. 1, marking a new record for daily outflows among U.S. spot Ether ETFs, excluding the Grayscale Ethereum Trust (ETHE). In total, Ethereum ETFs recorded $48 million in net outflows on Tuesday.

Liquidations Top $500 Million

The market's sudden plunge led to widespread liquidations. Data from CoinGlass indicates that Bitcoin traders betting on higher prices lost around $126 million, while Ethereum traders suffered nearly $100 million in losses.

Liquidations happen when exchanges forcibly close leveraged positions because traders can't meet the required margin. In total, $541 million was liquidated in the past 24 hours.

The market drop is also linked to escalating geopolitical tensions in the Middle East, triggering a wave of sell-offs across the crypto space.

According to QCP Capital, the conflict between Israel and Iran escalated as Israel launched a ground offensive in Lebanon, followed by Iran firing over 180 missiles in retaliation.

"Crypto, however, was hit much harder with BTC closing 4% lower. We seem to have found some support at the 60k level, but further escalation could push us much lower, possibly to the 55k level," QCP Capital wrote.

Lack of New Users

Another factor adding to market concerns is the decline in active Bitcoin and Ethereum addresses.

CryptoQuant reported that since the beginning of 2024, active Bitcoin addresses dropped to 855,000 from 1.17 million, while Ethereum addresses fell to 312,000 from 382,000.

"For the bulls to dominate the market, the influx of new investors is a crucial condition," noted Burak Kesmeci, a CryptoQuant analyst.

Meanwhile, U.S. stock markets were relatively unchanged on Wednesday. ?The Dow Jones Industrial Average gained 0.1%, while the S&P 500 closed flat and the Nasdaq climbed 0.15%.