Do All-Time-High Flows into Crypto and Traditional ETFs Limit the Fed’s Monetary Clout?

U.S.-listed exchange-traded funds (ETFs) have surged to $12.19 trillion in assets under management, with $799 billion in inflows this year alone, prompting questions about whether the Federal Reserve’s market influence is waning.

Data from ETFGI shows ETFs climbed from $10.35 trillion at the end of 2024 to $12.19 trillion by August. August inflows totaled $120.65 billion, with equity ETFs drawing $42 billion, fixed-income funds $32 billion, and commodity ETFs nearly $5 billion. The largest providers — iShares ($3.64 trillion), Vanguard ($3.52 trillion), and State Street SPDR ($1.68 trillion) — control roughly three-quarters of the market.

Crypto ETFs are also gaining traction. U.S.-listed bitcoin and ether ETFs now manage over $120 billion combined, led by BlackRock’s iShares Bitcoin Trust (IBIT) and Fidelity’s Wise Origin Bitcoin Trust (FBTC). Bitcoin ETFs alone represent more than 4% of bitcoin’s $2.1 trillion market cap.

Much of this demand is “autopilot” capital from retirement accounts, target-date funds, model portfolios, and robo-advisers that automatically invest in ETFs. This steady inflow is supporting equity and crypto markets, even amid economic uncertainty, and could be muting the impact of Fed policy.

With a 25-basis-point rate cut expected on September 17, U.S. equities remain near record highs, gold trades above $3,600 per ounce, and bitcoin hovers around $116,000. While ETFs broaden access and lower costs, analysts warn that large-scale redemptions could amplify volatility, highlighting how passive investing may now steer markets in ways the Fed cannot fully control.