In a turbulent week for Bitcoin, US spot-Bitcoin exchange-traded funds (ETFs) witnessed their largest daily outflow, adding to the woes of major investment firms like BlackRock Inc. and Fidelity Investments. On Wednesday, investors pulled out a substantial $564 million from nearly a dozen ETFs, marking the biggest drawdown since their introduction in January.

The recent decline in the value of the digital currency, along with the anticipation of higher interest rates, has significantly impacted riskier assets, including cryptocurrencies. The ETFs associated with BlackRock and Fidelity were part of an exceptionally successful product launch that attracted massive investments earlier this year. This influx of funds propelled Bitcoin's value to a record high of nearly $74,000 in March.

Despite the recent outflows, the overall net inflow into the ETFs stands at more than $11 billion to date. However, with the tightening of financial conditions and concerns over persistently high inflation, demand for these funds has dwindled. Market experts and crypto exchange executives acknowledge the current dip in Bitcoin and ETF outflows as a temporary setback, highlighting the healthy demand for ETFs in diverse geographic regions.

While Hong Kong recently introduced its first ETFs directly investing in Bitcoin and Ether, the development failed to boost sentiment within the crypto markets. Fidelity's Wise Origin Bitcoin Fund experienced a net outflow of $191 million on Wednesday, its largest daily outflow to date. Similarly, BlackRock's iShares Bitcoin Trust witnessed its first drawdown of $37 million. The largest spot-Bitcoin ETF, Grayscale Bitcoin Trust, also suffered an outflow of $167 million.

Bitcoin's value has plummeted by 23% since its last peak on March 14, hitting a two-month low on Wednesday. However, the original cryptocurrency showed signs of recovery on Thursday, bouncing back after three consecutive days of declines. As of 9 a.m. New York time, Bitcoin was trading close to the $58,600 level.

The current scenario indicates that investors have become more vigilant, closely monitoring the impact of economic conditions and central bank policies on the volatile crypto market. While the recent outflows present a temporary setback, industry insiders remain optimistic about the long-term potential and resilience of ETFs in the face of evolving market dynamics.