Last week, the crypto market experienced a notable shift in investor sentiment. This is clearly visible in the significant outflow of $454 million among digital asset investment products.
Despite a strong start to 2026, the market witnessed a four-day run of withdrawals totalling $1.3 billion. As analysts noted, this sudden reversal of trends is mainly driven by the growing concerns of the Federal Reserve’s hawkish stance on interest rates following recent macroeconomic data releases.
Crypto Market Sees Outflows Amid Fed Rate Cut Uncertainty
According to CoinShares’ weekly report, the crypto market has seen a massive $454 million in outflows over the past week. This cautious sentiment from investors is expected to be a result of the recent macroeconomic reports that hinted at no Fed rate cuts in March.
As the Fed interest rate reduction expectations began to fade, investors began withdrawing their holdings. A four-day streak of $1.3 billion effectively wiped off almost all the $1.5 billion that flowed into the market in the initial days of January. This highlights how quickly the market sentiment shifts depending on macroeconomic conditions.
The impact of data, including the US jobs report, was most prominent in the US. The country was the only region to post net outflows, with a massive $569 million flowing out of the market. In contrast, markets like Germany, Canada, and Switzerland continued to see modest inflows. This indicates that the prevailing negative sentiment is unevenly spread, concentrating more in the US.
Among top cryptocurrencies, Bitcoin led the outflow, with $405 million in negative flows marked. Ethereum closely followed with $116 million outflows. Meanwhile, XRP, Solana, Sui, and Chainlink saw inflows, reducing the overall negative effect of the crypto market.
No Fed Rate Cuts, Say Traders
After the release of the labour market data on Friday, expectations of the Fed rate cut faded, significantly impacting the crypto market. As the December unemployment rate fell more than anticipated, traders remain largely pessimistic about the rate cut decision. In a Bloomberg report, Robert Tipp, chief investment strategist at PGIM Fixed Income, noted,
“This keeps us on course for them to slowly continue cutting the fed funds rates as we go through this year. They are on the cusp of, or in the top end of, the neutral range. So they may feel like they are not having an impact on the economy, they can stand to skip a meeting.”
The community also asserted that the possibility of the Fed’s further rate cut is now dependent on how the labour market will evolve in the coming months. Although the central bank reduced the rate at its last three meetings, concerns have risen among policymakers that inflation remains above target.
Fed Rate Hike Ahead?
Adding more fuel to the prevailing speculations, Wall Street giants like JPMorgan predict that the Federal Reserve is likely to hike the interest rate in 2027. Barclays and Goldman Sachs also projected that the Fed is less likely to lower rates until mid-2026.
With this prediction, JPMorgan has withdrawn its previous forecast of a January rate cut. He says that the central bank’s next move is likely to be a 25-basis-point hike in the third quarter of 2027.
