Crypto ETFs Shed 2026 Gains as US Fed Rate Cut Hopes Fade Amid Outflows
Bitcoin and Ethereum exchange-traded funds (ETFs) have shed nearly all of their early 2026 gains due to shifting investor sentiment and fading expectations for a US Federal Reserve interest rate cut in March. Over a four-day losing streak, digital asset funds lost $1.3 billion in inflows.
Key Insights
Market Reversal: The funds had collectively seen $1.5 billion in inflows during the first two trading days of January 2026, but subsequent outflows have almost entirely erased these gains.
Outflows: In the last full week, $454 million worth of assets left crypto exchange-traded products, with Bitcoin bearing the brunt of the negative sentiment at $405 million in outflows.
Interest Rate Impact: The shift in sentiment is primarily tied to cooling expectations for an early Fed rate cut in March 2026 after stronger-than-expected economic data suggested inflation might be more persistent.
Higher interest rates generally negatively impact riskier assets like cryptocurrencies, as they make safer investments like bonds more attractive.
Current Prices: Bitcoin recently traded for around $91,722 and Ethereum for around $3,113.70.
Federal Reserve Expectations
The market is currently pricing in a high probability (over 95%) that the Federal Open Market Committee (FOMC) will maintain the current federal funds rate target range of 3.50%–3.75% at its upcoming meeting on January 27-28, 2026. Expectations for a cut later in the year have also diminished; a rate monitor tool shows a 73.6% probability of the rate staying at the current range by the March 18, 2026, meeting.
Major financial institutions like Goldman Sachs and JPMorgan hold differing views, but the general consensus has shifted away from immediate or multiple early-year rate cuts due to resilient economic and labor market data.
#CryptoETFs #bitcoin #ETH #Fed #ratecuts