On January 28, 2025, U.S. spot Bitcoin exchange-traded funds (ETFs) recorded significant outflows, totaling approximately $457 million. This shift ended a seven-day streak of inflows that had brought in over $4.2 billion. The downturn is largely attributed to investor apprehension following the global emergence of China’s DeepSeek, an open-source AI application. DeepSeek’s rapid adoption has raised concerns about U.S. competitiveness in the AI sector, prompting a broader risk-off sentiment in financial markets.
Impact on major Bitcoin ETFs
- Fidelity’s FBTC: Experienced the largest outflow, with investors withdrawing approximately $268.59 million.
- Grayscale’s GBTC: Saw outflows totaling around $108.47 million.
- Bitwise’s BITB and ARK 21Shares’ ARKB: Recorded withdrawals of $88.57 million and $50.11 million, respectively.
- VanEck’s HODL: Reported a more modest outflow of $5.68 million.
In contrast, BlackRock’s IBIT was the only Bitcoin ETF to register inflows, attracting approximately $63.94 million on the same day. This brings IBIT’s cumulative net inflows to nearly $40 billion since its launch.
Market reaction to DeepSeek’s emergence
The launch of DeepSeek has not only impacted Bitcoin ETFs but has also led to significant volatility in the broader financial markets. U.S. tech-focused ETFs, particularly those with substantial exposure to AI-driven companies, experienced notable declines. For instance, the Invesco QQQ Trust (QQQ), which includes major AI stakeholders like Nvidia, Apple, and Microsoft, fell by 2.7%. Similarly, the VanEck Semiconductor ETF (SMH) dropped by 8.7%.
These movements reflect investor concerns that DeepSeek’s advancements could challenge the dominance of U.S. tech giants in the AI sector, leading to potential shifts in market dynamics.
Conclusion
The recent outflows from Bitcoin ETFs underscore the interconnectedness of global technological developments and financial markets. As innovations like DeepSeek emerge, they can have far-reaching implications, influencing investor sentiment and prompting reevaluations of asset allocations across various sectors.
