Bitcoin inflows hits $436 million, ETF volumes are below average.
Bitcoin investment products saw a notable recovery last week, bringing in $436 million in inflows, marking a shift from the previous trend of outflows that had reached $1.2 billion, according to CoinShares’ latest report. This comes amid speculation about an impending interest rate reduction.
Despite the increase in inflows, ETF trading volumes remained flat at $8 billion, a significant drop from the average yearly volume of $14.2 billion.
Reason for the Inflows
James Butterfill, CoinShares’ head of research, attributed the sudden change to evolving market expectations for a potential 50 basis point interest rate cut, anticipated during a September 18 meeting. These expectations were driven by comments from William Dudley, the former president of the Federal Reserve Bank of New York, who argued during the Future of Finance Forum in Singapore that a rate cut was justified due to the weakening U.S. labor market. Dudley’s remarks emphasized that job risks were now a greater concern than inflation, fueling speculation about a potential rate cut.
Regional Inflows
In response to these changing market sentiments, the U.S. saw the majority of the inflows, with $416 million. Switzerland and Germany followed with $27 million and $10.6 million, respectively. However, Canada experienced outflows, losing $18 million over the same period.
Bitcoin Rebounds While Ethereum Struggles
Bitcoin led the surge in inflows, bringing in $436 million, reversing a 10-day streak of outflows that had previously amounted to $1.18 billion. Meanwhile, short-Bitcoin products recorded outflows of $8.5 million after experiencing three straight weeks of inflows.
On the other hand, Ethereum struggled, seeing $19 million in outflows. Analysts linked this to concerns over the profitability of Ethereum’s Layer-1 network following the March Dencun upgrade, which contributed to a dramatic 99% decrease in mainnet revenue. The rise of Layer-2 solutions, which offer lower transaction fees, has made them increasingly attractive and could potentially reduce the reliance on Ethereum’s mainnet for consumer applications if the trend continues.
Other Cryptos and Blockchain Equities
Solana continued its streak of positive inflows, marking its fourth consecutive week, with $3.8 million invested. Litecoin and Cardano also saw inflows, together accumulating about $900,000. Additionally, blockchain equities witnessed significant inflows, totaling $105 million, spurred by the recent launch of multiple new ETFs in the U.S.
