Bitcoin stuck in a rut after Warsh pick as ETFs shed billions

For some traders, the latest slide points to more pain for Bitcoin, with the potential for a break below US$80,000 if bearish sentiment persists. Photo by SEBASTIEN BOZON/AFP via Getty Images/Postmedia files

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Bitcoin traded near two-month lows after Donald Trump named Kevin Warsh as the next Federal Reserve chair — a choice that did little to lift sentiment in a market already under pressure from persistent exchange-traded fund (ETF) outflows.

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The largest cryptocurrency dropped as much as four per cent to US$81,045, its weakest level since November, before paring losses to around US$82,900. Some traders had hoped the Fed chair announcement might offer a narrative pivot. Warsh, a former central bank governor with deep establishment ties, has recently aligned with Trump’s push for lower rates. But his traditional background and prior hawkish record have left crypto investors unsure which version of Warsh will show up at the Fed.

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Instead, a risk-off tone lingered over markets as the Warsh news circulated: stock turned lower, and the dollar traded just off four-year lows. With Bitcoin now down more than 34 per cent from its October peak — and United States spot ETFs on track for their longest streak of monthly outflows since launching — traders appear unconvinced that either macro or policy signals offer much near-term relief. Around US$1.8 billion in bullish positions across all tokens have been liquidated in the past 24-hours, according to CoinGlass data.

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“While his nomination would support the case that rates will continue to decline in 2026 through to 2027, Warsh is a career economist who is all too aware of reducing too much, too quickly,” said Hayden Hughes, general partner at Tokenize Capital.

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Meanwhile, Binance announced that the exchange’s emergency insurance reserve fund known as SAFU will convert its roughly US$1 billion of assets held in stablecoins to Bitcoin over the next 30 days. The fund was established in 2018 to reimburse users in the event of security breaches or platform failures.

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The 12 U.S.-listed spot Bitcoin ETFs have recorded three consecutive months of net redemptions which, if the trend holds through the end of January, will mark the longest sustained run of outflows since these vehicles launched in 2024. Some US$5.7 billion has been drained from the products over that period, according to data compiled by Bloomberg.

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Bitcoin’s malaise contrasts with the recent surge in gold and other precious metals, as investors seeking refuge from geopolitical uncertainty shun cryptocurrencies in favour of traditional safe-haven assets. That’s raising doubts over claims the token functions as a kind of “digital gold.”

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“Suddenly, cryptocurrencies no longer appear to be an alternative to fiat money and a hedge against the not-so-responsible financial policies of major countries,” said Alex Kuptsikevich, chief market analyst at FxPro.

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Fund flows underscore the shift. BlackRock’s iShares Bitcoin Trust, the largest Bitcoin ETF, and one of the most successful fund launches ever, has fallen behind BlackRock’s Gold ETF in total assets.

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One way to assess whether Bitcoin is fulfilling its potential as digital gold is to measure its value in the precious metal itself. On that metric it is failing, slumping some 60 per cent in gold terms from a late 2024 peak.