- Both Bitcoin and Ethereum face capital outflows amid tensions in the Middle East:

Geopolitical tensions in the Middle East continue to escalate, as the U.S. Central Command announced late Tuesday that it launched retaliatory strikes against Iran after a U.S. helicopter was shot down earlier in the week. Axios reported that these operations targeted Iran’s air defense and radar systems in southern Iran.

The Iranian Revolutionary Guard announced its readiness to respond decisively to any additional U.S. military action, further intensifying regional tensions. The Revolutionary Guard also said it was responsible for drone raids targeting Al Salem Air Base in Kuwait, aggravating the geopolitical risks that continue to cast a shadow over crypto market sentiment.

Risk assets are in a critical state amid the complex geopolitical environment, as reflected by the crypto Fear and Greed Index, which stood at 9 points in the extreme fear zone on Wednesday, down from 10 points the previous day. This risk aversion may continue to limit the overall recovery of the crypto market, keeping investors neutral.

Crypto Fear and Greed Index | Source: Alternative
Outflows from Bitcoin exchange-traded funds (ETFs) continued on Tuesday, reaching approximately $77 million, according to SoSoValue data. This is the third consecutive day of outflows, bringing total inflows to $53.77 billion and net assets under management to $77.58 billion. These ongoing outflows point to a lack of risk appetite.

Bitcoin ETF Outflows | Source: CoinGlass
Spot Ethereum ETF flows saw a downward trend on Tuesday, with total outflows of $41 million, despite recording inflows of $82 million on the previous day. Overall, SoSoValue data shows a continuing downward trend since the beginning of May, indicating the dominance of risk-off sentiment.

Ethereum ETF Flows | Source: CoinGlass
Meanwhile, prices of spot XRP ETFs rose slightly on Tuesday, attracting $7.44 million in inflows after weak daily activity on Friday and Monday. Total inflows reached $1.43 billion, while average net assets were $982 million.
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