Bitcoin’s price recently experienced a sharp drop after Federal Reserve Chairman Jerome Powell’s comments during the latest Federal Open Market Committee (FOMC) meeting rattled investor confidence. Powell’s remarks on inflation and the potential slowing of rate cuts in 2025 triggered a major correction in Bitcoin’s price, causing it to plummet by over $13,000 in just a few days.

Powell’s Warning and Its Impact on Bitcoin

After the Fed’s decision to cut key interest rates by 25 basis points, Powell expressed concerns about inflation, signaling that 2025 might not see as many rate reductions as previously expected. The additional remark that the Fed was not authorized to buy and hold Bitcoin further dampened market sentiment, especially considering the contrasting pro-crypto stance by former President Donald Trump. Powell’s statements caused widespread fear among investors, particularly in riskier assets like Bitcoin.

The Bitcoin ETF Outflow Surge

The immediate aftermath of Powell’s comments saw Bitcoin’s price tumble from over $105,000 to just under $98,000. However, the market didn’t stop there; it dipped to a multi-day low of under $96,000, leaving over a billion dollars in liquidations.

One of the key factors driving the market downturn was a massive outflow from Bitcoin Exchange-Traded Funds (ETFs). Data from FarSide shows that US investors pulled more than $670 million from Bitcoin ETFs in just one day, marking the largest single-day outflow in the funds’ history. This outflow came primarily from two major funds: Fidelity’s FBTC, which saw $208.5 million in withdrawals, and Grayscale’s BTC, with $188.6 million. Even BlackRock’s IBIT ETF, which has been performing well, did not experience any fresh funding, although it avoided significant withdrawals.

The sell-off from Bitcoin ETFs sent a clear signal that investors were pulling back in response to Powell’s comments. With the crypto market experiencing increased uncertainty and heightened inflation concerns, many turned to safer assets, moving funds out of Bitcoin and into traditional safe havens like gold.

Ethereum ETFs Also Suffer

While Bitcoin ETFs saw the bulk of the outflows, Ethereum ETFs were also impacted by the same market dynamics. Ethereum had enjoyed a period of consistent inflows but experienced a change of direction on December 19, with $60.5 million being withdrawn from Ethereum ETFs. While this figure is much smaller than the Bitcoin ETF outflows, Ethereum still felt the brunt of the broader market’s bearish sentiment.

Ethereum’s price has also taken a hit, dropping by over 9% in the past day, currently trading at around $3,350. This decline follows its rejection at the $4,000 mark, indicating that Ethereum, like Bitcoin, is facing significant selling pressure in the face of growing concerns about inflation and market volatility.

Conclusion

Bitcoin’s recent price correction, largely driven by massive outflows from Bitcoin ETFs, highlights the fragility of the market in response to macroeconomic pressures. The $670 million withdrawal from Bitcoin ETFs serves as a stark reminder of how quickly investor sentiment can shift, especially when concerns about inflation and interest rates arise. As the market adjusts to Powell’s remarks and the broader economic landscape, both Bitcoin and Ethereum will need to regain investor confidence to reverse their current downtrends. Whether or not these assets can recover will depend on broader market conditions and investor sentiment in the coming weeks.