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Bitcoin faced major volatility on Wednesday, trading around $61,500 during the Asian morning hours after dropping as low as $60,300 late Tuesday. This sharp decline comes amid heightened geopolitical tensions as the conflict in the Middle East intensifies, affecting investor sentiment and hopes for a rally in what has historically been Bitcoin’s strongest month.
Escalating Tensions
The drop was triggered by Iran launching around 200 ballistic missiles toward Israel, following Israeli strikes on Lebanon over the past few weeks. Israel’s Prime Minister, Benjamin Netanyahu, responded with a vow to retaliate, raising fears of further escalation. The uncertainty surrounding these developments seems to have pushed investors toward safer assets like gold, which saw a rise, while Bitcoin plunged by over 6% at its lowest point. Within 24 hours, BTC recorded a 3.5% loss, its worst performance in over a month.
Analysts from Presto Research commented on the move, noting the unusual start to October, historically a bullish month for Bitcoin. However, the situation in the Middle East is overshadowing typical market behavior, causing more risk-averse moves from institutional investors.
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Bitcoin ETFs Record Massive Outflows
A key indicator of the shift in sentiment has been the massive outflows from U.S. spot Bitcoin exchange-traded funds (ETFs). On Tuesday, October 1, nearly $243 million was pulled from Bitcoin ETFs, according to data from Farside Investors. This marks the largest outflow in a month, with the last significant withdrawal occurring on Sept. 3, when $288 million exited these funds.
The outflows are notable in their timing. Over the past five months, this was the third-largest outflow day, halting a promising eight-day streak of inflows that peaked at $494 million on September 27.
Fidelity’s ETF was hit hardest, with $144.7 million in withdrawals. ARK 21Shares ETF followed, losing $84.3 million, while Bitwise’s ETF saw $32.7 million leave its portfolio. VanEck’s Bitcoin ETF reported $15.8 million in outflows, and the Grayscale Bitcoin Trust experienced a $5.9 million dip. Meanwhile, other ETFs like Invesco, Franklin, and Valkyrie saw no movement.
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Interestingly, BlackRock’s iShares Bitcoin Trust defied the trend, continuing to post positive flows. It reported $40.8 million in inflows, marking its 15th consecutive day without outflows, signaling a glimmer of institutional confidence amidst the broader market’s retreat.
While historically October has been a strong month for Bitcoin, ongoing conflict and investor caution could limit BTC’s potential for a recovery. Institutional investors will likely keep a close eye on developments in the Middle East, with further outflows expected if the situation worsens.
