Bitcoin Leads $321 Million Inflows After Fed’s Rate Cut: CoinShares Reports
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On September 23, the latest report showed that the cryptocurrency market saw a significant inflow of investments, totaling $321 million last week. This marked the second consecutive week of strong gains, mainly led by Bitcoin, which alone attracted $284 million.
Bitcoin Surges Amid Rate Cuts
According to a CoinShares report, the surge came after the U.S. Federal Reserve’s decision to reduce interest rates by 50 basis points. But this was a decline from the $436 million in inflows recorded the previous week.
Bitcoin-based investment products saw the majority of inflows, driven by both spot market movements and increased demand for short-Bitcoin investment products.
Digital asset investment products saw $321 million in net inflows for the second week in a row, according to CoinShares, spurred by the FOMC’s 50 bps rate cut.#Bitcoin dominated with $284 million in inflows, but #Ethereum wasn’t as lucky, marking its fifth consecutive week of… pic.twitter.com/8tpd3enzx3
— Kyledoops (@kyledoops) September 23, 2024
CoinShares reported a total of $284 million in Bitcoin inflows, reflecting a positive trend for the leading cryptocurrency. Additionally, short-Bitcoin products recorded an inflow of $5.1 million, as investors hedged against possible future volatility.
Despite the inflows into Bitcoin, Ethereum did not experience the same trend. Instead, Ethereum-based products saw $29 million in outflows, marking the fifth consecutive week of withdrawals.
These consistent outflows were primarily linked to continued withdrawals from the Grayscale Ethereum Trust and minimal inflows into newly launched exchange-traded funds (ETFs).
Meanwhile, Solana investment products continued to see small but consistent inflows, with $3.2 million reported last week.
According to CoinShares, the rate cut contributed to a 9% rise in the total assets under management (AUM) for digital assets. Investment product volumes also saw a 9% increase, reaching $9.5 billion for the week.
Broader Market Reactions
The rate cut is important because it lowers the cost of borrowing money, which encourages people and businesses to spend and invest more. When the U.S. Federal Reserve announced a 50 basis point rate cut, it signaled that the economy needed a boost, which made investors feel more confident.
Markets have lost their gains as big money is dumping into retail investors who think a 50 basis point cut will push us into a new bull market. Historically, data suggests rate cuts actually coincide with market tops/selling.
— Gareth Soloway (@GarethSoloway) September 17, 2024
However, this rate cut has elicited mixed reactions in the market as it has met criticisms, while other experts see it as a welcome development.
BitMEX co-founder Arthur Hayes criticized the Federal Reserve’s decision to cut rates amid growing U.S. dollar issuance and increased government spending. He warned that the markets could face negative outcomes as a result of these factors.
Meanwhile, Bas Kooijman, CEO of DHF Capital, stated that the rate cut marked the beginning of a long-anticipated cycle of interest rate reductions. According to him, “The decision acts as a start to the interest rate cut cycle that markets have been waiting for a long time now and could fuel appetite for assets like gold and others.”
Notably, the effects of the rate cut extended beyond cryptocurrencies. Gold prices also saw significant movement, with the price of gold hitting a record high of $2,629 per ounce on September 23.
