US Bitcoin ETFs Face Setbacks as Bitcoin Retreats Amid Growing Middle East Conflict

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Net flows in the U.S. spot Bitcoin ETF pool turned negative on Tuesday as Bitcoin retreated below $62,000 amid heightened tensions between Israel and Iran.

According to data tracked by Farside Investors, BlackRock’s iShares Bitcoin Trust (IBIT) was the only gainer, taking in more than $40 million yesterday. IBIT’s net buying has exceeded $2.1 billion since its January trading launch, with its holdings now exceeding 366,400 BTC, valued at approximately $23.2 billion.

However, IBIT gains were insufficient to offset outflows from other funds. On Tuesday, investors pulled more than $283 million from Fidelity’s FBTC, ARK Invest’s ARKB, Bitwise’s BITB, VanEck’s HODL, and Grayscale’s GBTC.

GBTC was no longer the star of the exit, as the fund bled only about $6 million in Tuesday’s trading, while FBTC led the way with $144 million worth of redemptions.

Overall, U.S. spot Bitcoin ETFs ended Tuesday with more than $242 million in net outflows. This marked a reversal from an eight-day streak of net inflows that began on September 19.

Bitcoin ETF demand turned red on a day marked by Iran’s launch of missile attacks on Israel, an event that escalated tensions in the Middle East.

As soon as news of Iran’s missile strikes broke, the value of Bitcoin began to fall. CoinGecko data shows that BTC has seen a drop of more than 3% in the past 24 hours, with a sharp drop of almost $4,000 to around $60,300.

BTC recovered slightly to $61,800, but its contrasting movement with gold and oil sparked debate about its role as a safe-haven asset.

On October 1, gold prices rose 1.4% to $2,665 an ounce, nearing a record high, while crude oil prices rose 7% to $72 a barrel. The US dollar and bonds also posted gains in response to an airstrike on Israel.

Historically, geopolitical tensions have led to Bitcoin price volatility. The Israeli attack on Iran earlier this year, for example, led to Bitcoin price corrections.

The current situation could continue to influence investor behavior, which may lead to further selling if the conflict intensifies.

Israeli Prime Minister Benjamin Netanyahu has vowed to retaliate against Iran following yesterday’s missile attack.

“Iran made a big mistake tonight and they will pay for it,” Netanyahu said during a Security Cabinet meeting.

The Crypto Fear and Greed Index fell from a neutral zone of 50 points on fear to 42 points. This suggests increased caution among investors as geopolitical risks are heightened.

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