Bitcoin Digital Asset Funds See $17M in Inflows After 5-Week Dry Spell
After five weeks of outflows, Bitcoin digital asset funds saw inflows totaling $17 million last week. On the other hand, Ethereum products continued to see outflows despite the much-hyped Merge upgrade, which amounted to $15 million last week and a total of $80 million in the past month.
Low Activity: Investors Exercise Caution Post Merge
A recent report by digital investment company CoinShares reveals that investors are exercising caution with their digital investments following the Merge. The report revealed that overall activity was low in the past week, with Ethereum seeing negative flows while Bitcoin experiencing positive flows.
More precisely, Bitcoin saw inflows totaling $17 million, which came after a 5-week run of outflows that totaled $93 million. “Meanwhile, short-bitcoin also saw minor inflows totaling US$2.6m with total AuM close to a record US$169m,” the report said.
Ethereum investment products, on the other hand, saw negative flows. The second-largest cryptocurrency saw outflows totaling $15 million. Notably, this is the fourth consecutive week for Ethereum to see negative flows, which now total $80 million.
Cumulatively, digital asset investment products saw positive flows of around $7 million last week. The tally highlights a lack of activity and engagement among investors, which can be related to the Fed’s hawkish stance. The report said:
“Digital asset investment products saw inflows totaling US$7m last week, another low activity week. The mixture of positive and negative flows by provider and asset suggests a continued lack of engagement amongst investors at present. We have recently written about crypto prices and their relationship to the USD, with hawkish rhetoric from the FED hampering any potential gains in crypto.”
Meanwhile, multi-asset investment products continue to be the best performers during this crypto winter. With only a few weeks of outflows, multi-asset investment products have seen around $224 million inflows year-to-date, “implying investors are seeking safety in numbers.”
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Crypto Prices Drop Ahead of Fed Hike Rate Decision
The bulk majority of the crypto market is trading in the red, with major cryptocurrencies down by at least 6% over the past 24 hours. The leading cryptocurrency has dropped to around $18,500, its lowest level so far in the year. Ethereum has also extended losses, plunging to around $1,300.
The red market can be attributed to the upcoming rate hike announcement from the U.S. Federal Reserve Bank. In a bid to tame inflation, Fed officials are expected to announce a third-straight 75-basis-point rate hike during the two days meeting ending on Wednesday.
Investors across both the crypto market and traditional equities markets are bracing for the announcement. However, some analysts believe the upcoming 75 bps rate hike is already priced in, arguing that Bitcoin is forming a bottom.
For one, crypto market analyst DrProfitCrypto has told his over 35,000 Twitter followers that the leading cryptocurrency has entered a “bottom phase” in which he is expecting the price to remain stable between $18,000 and $25,000 till March 2023.
However, the analysts warned that a 100 bps rate hike would further exacerbate market conditions. Notably, according to data from the CME Group’s FedWatch Tool, there is only a 20% chance of a 100 bps rate hike.
How do you think the markets would react following the upcoming rate hike? Let us know in the comments below.