Digital asset investment products recorded their first week of net outflows in five weeks, shedding a combined $414 million, according to the latest weekly fund flows report from CoinShares. Ethereum products bore the largest share of those losses, with outflows reaching $222 million over the period. That figure has pushed Ethereum’s year-to-date net flows to a negative $273 million, the worst performance of any crypto product tracked by the European digital asset manager.
The head of research at CoinShares, James Butterfill, attributed the Ethereum-specific drawdown to developments surrounding the Clarity Act, an upcoming U.S. crypto market structure bill. A recently circulated draft of the legislation has raised concerns about its potential impact on staked ETH products and yield-bearing stablecoin programs. Butterfill noted in his report that negative sentiment was concentrated almost entirely in the United States, which saw $445 million in outflows, while Switzerland recorded minor outflows of $4 million.
The fallout from the Clarity Act has extended beyond Ethereum funds. Circle, the issuer of the USDC stablecoin, saw its share price fall by roughly a quarter over the past week. Speculation has grown that the new draft legislation could specifically target yield-bearing stablecoin programs. While Circle does not offer yield on USDC directly, it benefits from exchanges such as Kraken and Coinbase paying users rewards for holding USDC balances in their wallets.
Broader market pressures also contributed to the sell-off, with the same forces that rattled Bitcoin ETFs coming into play. Escalating geopolitical tensions surrounding Iran added to investor unease, as did a sharp reversal in expectations for Federal Reserve interest rate cuts. Together, these factors compounded the risk-off sentiment already weighing on digital asset markets.
Traders have grown increasingly confident that the Fed will not reduce rates significantly in the near term. Data from the CME FedWatch Tool shows that roughly 97.4% of traders now expect the Federal Open Market Committee to hold rates at their current level, with a small fraction of 2.6% anticipating a potential rate increase of a quarter of a percentage point. This marks a dramatic shift from a month ago, when approximately 25% of traders believed the FOMC might cut rates at its June meeting.
Users on Myriad, a prediction market platform owned by Dastan, the parent company of crypto media outlet Decrypt, reflect similar expectations. At the time of the original report, 91.5% of users on the platform believed the Fed would not cut rates by more than 25 basis points before July. The FOMC is scheduled to vote on interest rates next at its April 28 meeting, which will be closely watched by markets. Meanwhile, Ethereum was trading at $2,041 as of late Monday morning, having recovered 2.3% from a weekend decline, according to price aggregator CoinGecko.
Originally reported by Decrypt.
