Spot Bitcoin ETFs are grappling with massive capital outflows as geopolitical tensions and economic uncertainty grow. From March 28 to April 8, investors withdrew a total of $595 million, based on data from Farside Investors. Even after the U.S. government eased most import tariffs on April 9, another $127 million exited the market—pushing total outflows to a massive $772 million.
Despite Bitcoin hitting a recent high of $82,000 on April 9, investor confidence in ETFs remained weak. The divergence between Bitcoin’s bullish performance and declining ETF participation signals deeper concerns rooted in macroeconomic trends.
ETF Outflows Persist Despite Bitcoin’s Strong Rally
Under normal market conditions, a sharp Bitcoin price increase tends to drive fresh capital into spot ETFs. Yet, this time around, the price surge failed to attract inflows. Instead, investors continued to exit, highlighting a clear disconnect. Risk aversion appears to be taking hold, as participants prioritize safety over growth.
This behavioral shift reflects widespread anxiety about inflation fueled by tariffs, sluggish economic momentum, and tightening credit conditions. These factors collectively weaken demand for volatile assets like Bitcoin.
Credit Market Stress Pushes Investors Toward Safer Assets
Michael Weidner, co-head of global fixed income at Lazard Asset Management, explained that tightening credit conditions are driving this retreat from risk. In a recent Reuters interview, he pointed out that liquidity in credit markets has sharply declined, leading investors to seek refuge in cash and U.S. Treasuries.
Even without significant movement in Treasury yields, a credit crunch could slow business activity and consumer spending. When lenders tighten standards, access to capital dries up—affecting both corporations and individuals.
Echoing this view, Ross Mayfield, investment strategy analyst at RW Baird, noted that even a Federal Reserve rate cut might not restore investor confidence. In his words, “In a stagflation scenario triggered by tariffs, both high-yield and investment-grade borrowers will face elevated borrowing costs.”
Corporate Bond Spreads Widen—A Red Flag for Risk Assets
Dan Krieter, director of fixed income strategy at BMO Capital Markets, highlighted a major development: corporate bond spreads recorded their biggest weekly jump since the March 2023 banking crisis. This spread—representing the difference between corporate and government bond yields—signals rising risk perception.
As spreads widen, it becomes clear that investors are demanding greater compensation to hold corporate debt. This shift reflects deepening concerns about inflation and economic pressure, which could raise default risks. Speculative assets like Bitcoin are bearing the impact of this growing caution.
Tariff Inflation Worries Intensify Economic Uncertainty
The Biden administration’s trade policy, particularly around tariffs, has added another layer of complexity for investors. Although many import tariffs were temporarily suspended on April 9, market participants expect these measures to stoke inflation in the months ahead.
While the U.S. Consumer Price Index (CPI) for March posted a 2.8% annual increase—the lowest since 2020—it did little to calm inflation fears. Joe Brusuelas, chief economist at RSM, called this CPI reading the “last clean print” before inflation accelerates due to new trade barriers. He emphasized that markets are preparing for higher prices as global supply chains adjust.
Rising inflation expectations, coupled with slowing corporate debt demand and recession fears, are pushing institutional investors away from crypto-related ETFs—even when Bitcoin’s price shows strength.
Bitcoin ETFs Struggle With Confidence Gap
Although Bitcoin hovers near all-time highs, institutional demand through ETFs continues to decline. Many large investors still view Bitcoin as a high-risk asset rather than a stable hedge against inflation or monetary policy shifts.
Reversing this perception will require more than just price momentum. Bitcoin must reinforce its narrative as a macro hedge—one that benefits from fixed supply and decentralized architecture. But such a shift in sentiment won’t happen overnight.
Until economic indicators become more predictable and credit markets ease, investors are likely to remain cautious, favoring traditional safe-haven assets like cash and Treasuries.
Conclusion: Investors Seek Safety Amid Volatility
The recent $772 million in ETF outflows underscores a larger trend—risk assets are out of favor in today’s uncertain environment. Despite Bitcoin’s impressive rally, institutional hesitation reflects broader macroeconomic fears. Until inflation expectations stabilize and lending conditions improve, Bitcoin ETFs may continue to face headwinds.
Disclaimer: This article is intended for informational purposes only and does not constitute financial advice. Always conduct your own research or consult with a professional advisor before making investment decisions.
