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The Federal Reserve may have triggered the second biggest outflows ever recorded for spot Bitcoin exchange-traded funds and worse may be to come.

Market watchers sounded the alarm after the Federal Open Market Committee said it will keep interest rates between 5.25% to 5.50%.

The situation resembles August 2022, when Fed Chair Jerome Powell warned that rate hikes will cause some pain to the US economy, said Quinn Thompson, founder of crypto hedge fund Lekker Capital.

Back then, spooked investors sold off risk assets, sending benchmarks tumbling.

In a few weeks time, it will be obvious, Thompson said on X. This time, he didnt say it so explicitly because last time the market melted down and they had to ease sooner as a result.

The more hawkish-than-expected Fed meeting triggered a cascade of outflows from spot Bitcoin ETFs to the tune of $621 million as investors scaled back their exposure, crypto asset manager CoinShares said in a report.

The ETF outflows were the largest Bitcoin has experienced since March.

Bitcoin and other risk-on assets tend to perform better in lower rate environments.

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Total crypto assets under management in ETFs fell 6%, from $100 billion to $94 billion, off the back of outflows and price depreciation.

However, Ethereum investment products saw inflows totalling $13 million.

Lido and Ripple, two of the largest cryptocurrencies by market value, also bucked the trend, racking in $3 million in total.

Crypto wasnt the only sector impacted.

Investors dumped almost $22 billion from US equity funds over the course of the week, the largest outflows since December 2022.

Tom Carreras is a markets correspondent at DL News. Got a tip about Bitcoin ETFs and the Fed? Reach out at tcarreras@dlnews.com.

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The real Bitcoin fallout will soon 'be obvious' after Fed sparks $620m in ETF outflows - DLNews