Crypto market sees $415M outflows amid Fed's stance

The crypto market experienced a reversal of fortune with $415 million in outflows last week, which ended a streak of positive flows since the start of 2025.

This shift is largely attributed to Federal Reserve Chair Jerome Powell's hawkish comments and higher-than-expected U.S. inflation data.

According to CoinShares, crypto outflows reached $430 million last week, with Bitcoin (CRYPTO:BTC) feeling the most impact due to its sensitivity to interest rate expectations, signaling a risk-off sentiment.

The U.S. Federal Reserve indicated that inflation climbed to 3% year-on-year in January, surpassing expectations, while core inflation reached 3.3%, raising market concerns.

Crypto investors reacted negatively as the overall market cap fell by 5%, and Bitcoin slipped below $95,000.

Powell's emphasis on maintaining elevated interest rates to combat inflation dashed hopes for early rate cuts, impacting speculative assets.

"A bit of reverse wealth effect may be the top factor to alleviate inflation, which means highly speculative crypto’s at the forefront… It may be silly to expect inflation to drop until risk assets do," Analyst Mike McGlone stated.

The market was already reeling from President Donald Trump’s tariffs on Canada, Mexico, and China, further weighing on risk-on assets.

The Bitcoin Fear and Greed Index dropped into ‘Fear’ territory following the CPI release.

According to CoinShares researcher James Butterfill, most of the crypto outflows, totaling $464 million, originated from the U.S., where investors reacted strongly to domestic economic signals.

"We believe these outflows were triggered by the Congressional meeting with Fed Chair Jerome Powell, who signaled a more hawkish monetary policy stance, coupled with US inflation data exceeding expectations…The majority of outflows originated in the US…most other countries remained largely unaffected by the news," Butterfill noted, 

This $415 million crypto outflow marks the first net withdrawal from digital asset investment products in 2025.

Bitcoin ETF outflows ranged from $56.76 million to $243 million due to inflation and Powell’s stance on rate cuts.

Ethereum (CRYPTO:ETH) ETFs showed more resilience, avoiding similar capital flight.

A JPMorgan survey indicated that 51% of traders view tariffs and inflation as the most influential market factors in 2025.

Additionally, 41% of respondents expressed concerns about volatility in response to unpredictable political developments.