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Unprecedented Withdrawals Hit Bitcoin ETFs, Impacting BlackRock and Fidelity Portfolios

The U.S. spot-Bitcoin exchange-traded funds (ETFs) experienced their most significant single-day withdrawal to date, as Bitcoin is on track for its most challenging week since August of the previous year.

On Wednesday, investors withdrew a collective $564 million from nearly a dozen of these funds, marking the largest outflow since these ETFs were first introduced in January. The anticipation of persistently high interest rates has negatively affected volatile investments such as cryptocurrencies.

Initially, ETFs from companies like BlackRock Inc. and Fidelity Investments were part of what was considered a remarkably successful debut for this new type of fund. The influx of capital helped propel Bitcoin to a record high of nearly $74,000 in March.

To this day, these funds have amassed a net total of over $11 billion. However, there has been a noticeable decrease in demand recently, coinciding with the tightening of financial conditions in the U.S., where the Federal Reserve is grappling with persistent inflation.

Caroline Bowler, CEO of BTC Markets Pty, a cryptocurrency exchange, commented, “We’re looking at a momentary snapshot. Despite the recent pullback in Bitcoin and the ETF outflows, the broader demand for ETFs across various regions remains robust.”

Despite Hong Kong debuting its first ETFs that invest directly in Bitcoin and Ether this week, the move did not improve the sentiment in the cryptocurrency markets.

The Fidelity Wise Origin Bitcoin Fund experienced its largest daily net withdrawal of $191 million on Wednesday. For the first time, BlackRock’s iShares Bitcoin Trust faced a $37 million reduction. The Grayscale Bitcoin Trust, the biggest spot-Bitcoin ETF, saw $167 million in withdrawals.

From its peak on March 14, Bitcoin’s value dropped by 23%, hitting a two-month low on Wednesday. However, the pioneer cryptocurrency saw a rebound on Thursday after declining for three consecutive days. At 9 a.m. New York time, it was trading around the $58,600 mark.

Sentiment: Negative

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