Crypto Funds Record $436M Inflows Amid Rate Cut Expectations

Crypto investment products have rebounded with an impressive $436 million in inflows following a prolonged period of outflows totaling $1.2 billion.

The surge in inflow is attributed to shifting market expectations, particularly the potential interest rate cut on September 18.

Bitcoin Dominates While Ethereum Struggle

According to data from CoinShares, Bitcoin was the primary beneficiary, with a weekly net inflow of $436 million, reversing a 10-day streak of outflows totaling $1.18 billion.

However, short-bitcoin investment products experienced $8.5 million in outflows following three consecutive weeks of inflows.

On their part, Ethereum funds continued to struggle, generating a further $19 million in net outflows last week, adding to $98 million in negative flows the week before.

Notably, CoinShares stated that this struggle is likely due to concerns over layer-1 profitability following the Dencun upgrade. Market observers have noted a 99% decline in Ethereum’s mainnet revenue since March 2024.

Meanwhile, Solana marked its fourth consecutive week of inflows, totaling $3.8 million.

Blockchain equities mirrored the positive sentiment, registering $105 million in inflows, boosted by the seeding and launch of several new ETFs in the U.S.

Regarding regional performance, the United States took the lead with $416 million in net weekly inflows. Switzerland and Germany saw notable inflows of $27m and $10.6m, respectively. However, Canada recorded minor outflows of $18 million.

Despite the wave of inflows, trading volumes in exchange-traded funds remained flat at $8 billion for the week, significantly below the year-to-date average of $14.2 billion.

What Contributed to the Inflows?

CoinShares’ head of research, James Butterfill, attributed the shift to changing market expectations for a possible 50 basis point interest rate cut on September 18.

This followed remarks by William Dudley, former president of the Federal Reserve Bank of New York, at the Bretton Woods Committee’s annual Future of Finance Forum in Singapore.

Dudley argued that a 50 basis point cut was appropriate, citing a weakening U.S. labor market. He emphasized that job risks outweighed inflationary concerns in support of his call for a reduction.