Bitcoin exchange-traded funds experienced their worst weekly outflows of 2026 as rising Treasury yields reinforced market expectations that the Federal Reserve will maintain elevated interest rates under new Chairman Kevin Warsh, driving investors away from risk assets and zero-yielding cryptocurrencies.

Digital asset investment products recorded $1.47 billion in total outflows last week—the second consecutive week of redemptions and the third-largest weekly outflow of the year—according to CoinShares data published Monday. The selling pressure accelerated as bond-market traders ramped up bets that borrowing costs will remain elevated for an extended period.

Market Context

The outflows arrived as the Treasury market signaled a hawkish shift in rate expectations. The spread between two-year and 10-year yields widened by more than 12 basis points last week, with the two-year yield rising faster—indicating traders expect higher short-term borrowing costs to persist. Similarly, the gap between five-year and 30-year yields expanded, flashing similar signals of elevated long-term rate expectations.

The move came as investors recalibrated positions following commentary from new Fed Chairman Kevin Warsh, whose remarks suggested a cautious approach to monetary easing. Higher interest rates typically disincentivize riskier asset classes and weigh heaviest on emerging technologies like cryptocurrencies that offer no yield and rely on capital appreciation narratives.

Analysis

Bitcoin funds led the exodus, with $1.32 billion in weekly redemptions marking their largest outflow of 2026. The 11 U.S.-listed spot bitcoin ETFs alone witnessed $1.26 billion in net departures, following the preceding week's $1 billion withdrawal—signaling a deepening and broadening of risk-off positioning despite continued progress on the CLARITY Act, which industry advocates say could provide regulatory clarity for digital assets.

"Cumulative outflows over the two weeks now stand at US$2.54bn, suggesting the Iran-related risk-off has deepened and broadened despite continued CLARITY Act progress," said James Butterfill, head of research at CoinShares, in a report shared with CoinDesk.

Ethereum funds absorbed $223 million in redemptions as altcoin ETFs also experienced material moderation in flows. The weakness across digital asset ETPs contrasts with other asset classes attracting capital: commodities are rallying amid disruptions to oil flows through the Strait of Hormuz, while investors weigh potential redeployment into impending IPOs, most notably SpaceX, which could be the largest ever public offering.

Key Numbers

- $1.47 billion in total weekly outflows from digital asset investment products (CoinShares)

- $1.32 billion outflow from bitcoin funds—largest weekly redemption of 2026

- $1.26 billion exodus from U.S.-listed spot bitcoin ETFs specifically

- $223 million pulled from ether funds

- $2.54 billion in cumulative two-week redemptions across all digital asset ETPs

- 12+ basis points: the widening of the 2-year/10-year Treasury yield spread last week

What to Watch

The Fed's preferred inflation gauge, core PCE, releases Thursday and could clarify whether rate-cut expectations shift. Traders will monitor the two-year Treasury yield closely—if it continues climbing, crypto markets may face sustained headwinds as the opportunity cost of holding non-yielding assets rises. The CLARITY Act's progress through Congress remains a wildcard; passage could provide a sentiment catalyst even if fundamental outflow pressures persist.

The $77,000 price level represents key near-term support for bitcoin, while the BTC-gold ratio will test its March-established bullish trendline—a breakdown would signal broader bear market resumption.