Crypto ETFs Bleed $291M as US Inflation Data Sparks Mass Exodus

Inflation fears trigger brutal crypto ETF selloff

US inflation data just delivered a gut punch to crypto ETFs—sparking a massive $291 million hemorrhage in BTC and ETH funds. Investors bolted from digital asset exposure as traditional economic indicators flexed their enduring influence over supposedly decentralized markets.

The mechanics behind the meltdown

Hotter-than-expected inflation numbers sent Treasury yields soaring—crushing risk appetite across speculative assets. Crypto ETFs, designed as mainstream gateways, instead became exit ramps as institutional players executed rapid-fire redemptions. The selloff exposed crypto's lingering correlation to traditional macro forces—something maximalists still pretend doesn't exist.

When 'digital gold' tarnishes fast

Bitcoin's store-of-value narrative hit another reality check as ETF flows moved in lockstep with risk-off tradFi sentiment. The episode proves that when Wall Street sneezes, crypto still catches a cold—hardly the financial revolution promised. Maybe next time we'll finally decouple... or maybe not. After all, who needs economic sovereignty when you can just follow the Fed like everyone else?

Market wary as Fed inflation gauge lifts dollar

The heavy outflows in the Bitcoin and Ether ETFs came as the U.S. published new inflation data that caught investors’ eyes. The central bank’s favored measure of underlying inflation, the Core Personal Consumption Expenditures (PCE) index, increased 2.9% year-over-year in July, the fastest pace since February.

The figure aligned with economists’ estimates but reinforced that inflation pressures are proving sticky. The figure also comes as the Fed is pressured to follow through on long-awaited rate cuts.

Looking closer at the report, energy prices offered some relief by partially offsetting overall increases. However, the services sector told a different story. Service costs surged 3.6% year-over-year, reflecting sustained demand and rising wages. Economists warn that this type of inflation is usually harder to control.

Compounding the pressure are rising import costs associated with President Donald Trump’s tariffs. The administration put in place across-the-board 10% tariffs and added duties on specific goods. Though meant to support domestic output, these steps have also raised the cost of a wide range of everyday products for American companies and consumers.

For investors, the report came at an opportune moment. Markets have been betting the Fed will cut interest rates in September to help keep growth going. But with inflation remaining stubborn, traders aren’t so sure. A cooler job market or softening job data in the weeks ahead could push the Fed toward easing policy. On the flip side, stubbornly high prices could delay action and prolong tighter financial conditions.

Analysts warn that the Federal Reserve is walking a tightrope. One strategist told MarketWatch that the central bank’s biggest concern, with inflation trending upward, is cutting rates too early and triggering another price spike. The strategist added that the Fed did not want to keep rates elevated for too long, which could choke off economic growth.

Ethereum adoption is still showing momentum

Despite market fluctuations, outflows from Ether ETFs have remained limited since their July 2024 launch. Inflows surged 44% month-on-month, rising from $9.5 billion to $13.7 billion, driven primarily by institutional investors and corporate treasuries.

Companies now collectively hold around 4.4 million ETH, valued at over $19 billion—approximately 3.7% of total issuance, according to StrategicETHReserve. This growing adoption has bolstered confidence in Ethereum’s role as a long-term store of value and a key asset for corporate balance sheets.

Fabian Dori, chief investment officer at Swiss crypto bank Sygnum, said we are finally seeing the adoption and recognition of Ethereum’s value proposition after prolonged underperformance compared to Bitcoin and weak investor sentiment.

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