Crypto ETFs see over half a billion dollars in outflows amid post-midterm market slide

U.S. spot crypto exchange-traded funds witnessed more than half a billion dollars in net outflows on Thursday as markets reversed initial gains following the U.S. midterms election results.

Among bitcoin ETFs, Fidelity's FBTC led Thursday's net outflows with $199.9 million, followed by BlackRock's IBIT with $105 million and Grayscale's GBTC with $49.9 million, according to data compiled by The Block. Franklin Templeton's EZBC, VanEck's HODL, and Ark Invest's ARKB also saw net outflows, while the remaining ETFs posted zero flows for the day.

Ethereum funds also witnessed heavy net outflows, led by BlackRock's ETHA and ETHB, with $75.2 billion and $22 billion in redemptions, respectively. Fidelity's FETH and Grayscale's ETHE saw outflows too.

Other major crypto ETFs didn't fare much better, accounting for size. U.S. Solana ETF saw a combined $1.2 million in net outflows for the day, Zcash ETFs $11 million, and Hyperliquid ETFs $3 million, according to SoSoValue data. XRP ETFs were the only outlier, with zero flows for the day.

Major U.S. crypto ETFs have now seen a combined net outflow of more than $1.1 billion so far this week.

Crypto slides amid broader market selloff post-midterms

Bitcoin Bitcoin (BTC) fell 5.6% on Thursday, more than erasing an initial 4% gain on Wednesday following Tuesday's U.S. midterm elections. Ether Ethereum (ETH) was hit harder, falling 7.8% for the day, with the GMCI 30 index, representing a selection of the top 30 cryptocurrencies, dropping 6.4%.

Tech stocks also suffered, with the Nasdaq Composite falling 5.5%, and the S&P 500 dropping 4.4% as investors continue to weigh the impact of potential restrictions on the AI infrastructure buildout following the Democrats' sweep of both the House and Senate.

Kyle Rodda, senior financial market analyst at Capital.com, said the Democratic sweep added to concerns over the AI investment boom, with investors already questioning technology valuations and the pace of infrastructure spending.

"The regulatory and political risks arise at a time when the proverbial AI trade was already on shakier foundations," Rodda said, pointing to disappointing earnings and signs of slowing AI spending.

Axel Rudolph, chief technical analyst at IG, told The Block that bitcoin has been "dragged into the AI rout as investors rapidly unwind risk across technology and crypto markets." 

Rudolph said bitcoin's correlation with technology stocks had left it exposed to the selloff, with more than $1 billion in leveraged crypto positions liquidated in 24 hours as the market continued to decline.

US jobs report and Fed outlook

Friday's U.S. jobs report could complicate matters further for markets, particularly if the figures give the Federal Reserve more reason to raise rates.

Economists expect around 60,000 to 65,000 new jobs, according to Daniela Hathorn, senior market analyst at Capital.com. She warned that a stronger jobs report, particularly one showing higher wage growth, could send both Treasury yields and the dollar higher.

Despite the broader market weakness, André Dragosch, head of research for Europe at Bitwise, expects bitcoin to outperform U.S. equities as the AI trade unwinds.

Dragosch said bitcoin is now more sensitive to the dollar and expectations for monetary policy than to economic growth, and could decouple from stocks if financial conditions improve.