The institutional market has suffered a major setback with outflows of $1.7 billion recorded in the last week, causing cryptocurrency ETF investment to accumulate a negative balance so far this year. According to James Butterfill, head of research at CoinShares, this shift in trend has wiped out accumulated gains since the beginning of January 2026.
This massive exodus of capital, primarily concentrated in U.S.-listed funds, responds to growing macroeconomic uncertainty and geopolitical tensions. The magnitude of the redemptions has been such that, in just seven days, investor sentiment has shifted from optimism to extreme caution, affecting the stability of major digital assets across the board.
Kevin Warsh’s nomination and its effect on exchange-traded funds
The primary cause of this financial slump lies in the recent nomination of Kevin Warsh to lead the Federal Reserve, a decision that has reshaped expectations regarding interest rates for the coming months. Although Warsh has shown some openness toward digital innovation, his historical reputation as a monetary “hawk” suggests a policy of greater rigor and inflation control.
In this way, the possibility that the Fed maintains restrictive rates has reduced risk appetite, directly impacting cryptocurrency ETF investment on a global scale. Meanwhile, Bitcoin has retreated 9.9% over the week, trading near $78,867, far from its historical highs reached during the previous month of October 2025.
How does the new Fed leadership affect the future of digital assets?
The selling impact has not been limited to Bitcoin, as Ethereum products suffered losses of $308 million, reflecting a widespread weakness in the sector. However, some inverse products betting against Bitcoin’s price attracted $14.5 million, seeking protection against the decline currently being experienced by the broader market.
On the other hand, the $73 billion drop in assets under management since late 2025 highlights the end of what many considered an uninterrupted bullish cycle. Therefore, cryptocurrency ETF investment now faces a period of consolidation, where analysts will closely monitor global liquidity and the next moves from the Federal Reserve.
Despite the current outlook, experts like Thomas Perfumo from Kraken suggest that the market might be overstating Warsh’s restrictive stance, as he might actually favor stability. Furthermore, volatility is expected to continue through the next quarter, demanding greater resilience from institutional investors who still hold their positions within this complex financial ecosystem.
