Surge in Cryptocurrency Inflows Following Federal Reserve Rate Cut

Cryptonews John Brightwater September 23, 2024

Surge in Cryptocurrency Inflows Following Federal Reserve Rate Cut

CoinShares reported that the cryptocurrency market saw inflows of $321 million, driven partly by the Federal Reserve’s recent interest rate cut. While Bitcoin led with inflows of $284 million, Ethereum faced outflows of $29 million. The majority of inflows originated from the U.S., despite notable outflows from European countries. Experts project continued attention to economic indicators as the market adapts to monetary policy changes.

The latest report from CoinShares indicates a significant surge in inflows within the cryptocurrency market, marking the second successive week of positive influxes attributed to the Federal Open Market Committee’s (FOMC) recent decision to reduce interest rates for the first time since 2020. The CoinShares research published on September 23 revealed that crypto investment products experienced inflows totaling $321 million. Although this figure represents a decline from the prior week’s $436 million rebound, the ongoing positive trend in inflows remains noteworthy. CoinShares’ Head of Research, James Butterfill, attributed the recent inflow primarily to the FOMC’s decision to lower the interest rate by 50 basis points last Wednesday. He stated, “As a result, total assets under management saw a 9% growth. Total investment product volumes were $9.5 billion, up 9% from the week prior.” The report revealed that the bulk of the inflows originated from the United States, accounting for $277 million, followed by Switzerland at $63.4 million. Brazil recorded modest inflows of $1.4 million, while Australia noted no trading activity. However, these were counterbalanced by outflows from several European countries, with Germany and Sweden experiencing outflows of $9.5 million and $7.8 million respectively. Canada also faced outflows of $2.3 million, alongside Hong Kong, which saw outflows of $1.3 million. Bitcoin (BTC) led the charge with the greatest weekly inflows, amassing $284 million, which similarly drove short-bitcoin investments up by $5.1 million. Conversely, Ethereum (ETH) has observed a five-week streak of being an outlier, enduring weekly outflows amounting to $29 million. Jean-David Pequignot, Head of Markets at OSL, a regulated digital asset platform in Hong Kong, conveyed to crypto.news that Bitcoin and other digital assets have seen a rally following the FOMC rate cut. However, he noted caution regarding further cuts, mentioning, “the committee remains cautious about further cuts.” Pequignot highlighted the differing stances within the committee, with Governor Bowman advocating for a smaller cut and Chair Jerome Powell expressing concerns about the implications of aggressive policy easing. This scenario exemplifies the considerable impact that traditional monetary policies have on the cryptocurrency market, with historical data indicating that rate cuts often bolster high-risk assets. As the U.S. election cycle approaches, Pequignot underscored the significance of forthcoming economic indicators, stating, “The US election is fully in play, and the market will pay great attention to economic indicators in the coming months regarding where the Fed fund rate is heading.”

The article explores the relationship between traditional monetary policy, specifically U.S. Federal Reserve interest rates, and the cryptocurrency market’s performance. The decision by the FOMC to cut rates affects investor behavior, and the report highlights the direct influence of such economic decisions on the inflows and outflows of cryptocurrency investments. CoinShares, a prominent digital asset firm, provides insights into the current investment trends in the crypto sector and offers quantitative data reflecting recent market movements, including the performance of significant cryptocurrencies such as Bitcoin and Ethereum.

In conclusion, the cryptocurrency market is currently experiencing positive inflows, influenced significantly by the Federal Reserve’s recent interest rate cut. With Bitcoin showing the most significant growth in inflows while Ethereum faces outflows, this dynamic illustrates investors’ responsiveness to traditional monetary policies. As the economic landscape evolves, particularly with the impending U.S. election, market participants will closely monitor indicators that may signal the future direction of interest rates and their subsequent impact on digital assets.

Original Source: crypto.news