Bitcoin extends cautious recovery as ETF outflows persist and Fed tightening risks linger

Bitcoin (BTC) extended its cautious recovery, trading around $76,500 at the time of writing on Thursday after a modest rebound in the previous session. Continued outflows from spot Bitcoin exchange-traded funds (ETFs) reflect the cautious positioning of institutional investors so far this week.

At the same time, potential gains for the world’s largest cryptocurrency remain limited as the US Federal Reserve’s hawkish outlook and escalating tensions in the Middle East weigh on investors’ risk appetite.

Signs of weakening institutional demand

Institutional demand has remained cautious so far this week. Data from SoSoValue showed that spot Bitcoin ETFs recorded net outflows of $295.98 million on Wednesday, following $450.33 million in outflows on Tuesday.

This marked a second consecutive day of withdrawals this week, signaling signs of weakening demand. If these outflows persist and intensify over the course of the week, Bitcoin could face a deeper correction.

Fed rate hike and hawkish stance limit Bitcoin gains

The US central bank voted unanimously to raise its benchmark interest rate by 25 basis points, lifting the target range for the federal funds rate to 3.75%-4.00% for the first time since 2023 at the conclusion of its September monetary policy meeting on Wednesday.