Recent data illustrates a resurgence in capital inflow into cryptocurrencies, particularly Bitcoin, after a brief stagnation. The release of favorable inflation figures for July is a significant driver behind this uptrend.
Insight into Last Week’s Crypto Investments
CoinShares’ latest report reveals that cryptocurrencies witnessed a combined inflow of $28.5 million. Impressively, Bitcoin dominated this influx, attracting a massive $27 million. Contrastingly, the preceding three weeks had seen Bitcoin suffer net outflows of $144 million.
Ethereum (ETH) and XRP weren’t left behind either. They recorded positive inflows, amassing $2.5 million and $0.5 million, respectively. Intriguingly, this marks XRP’s sixteenth straight week of inflows, with its assets surging by 127% since the year’s commencement.
According to CoinShares, the upbeat mood in the crypto market might be attributed to the recent US inflation data. Since it slightly undercut forecasts, it indicated a diminished likelihood of a rate hike in September.
Previous Year’s Scenario: Federal Reserve’s Strategy
Digital assets, including Bitcoin, faced a downturn in the past year. The reason? The Federal Reserve’s aggressive rate hikes—the quickest in its history—to counteract soaring inflation.
With the Consumer Price Index (CPI) stabilizing at 3.2% year-on-year, the Federal Reserve’s intensive rate-hiking phase may have culminated. Market projections suggest an 88% probability of the Fed maintaining a 5.25% rate in their upcoming September review, as indicated by the CME FedWatch Tool.
Mirroring the Federal Reserve’s moves, the Bank of Canada is also anticipated to maintain a 5% rate throughout the year. Interestingly, CoinShares pointed out that the bulk of last week’s crypto inflows ($24 million) was directed towards Canada’s Purpose ETF—a pioneering Bitcoin spot ETF.
Besides Canada, Switzerland also witnessed significant crypto investments, recording an inflow of $7.9 million.
US Bitcoin Spot ETF: A Potential Game-Changer?
June saw an escalating buzz around the possibility of a U.S. Bitcoin spot ETF. This was primarily triggered by BlackRock’s filing for such a product, a move later emulated by Fidelity and other giants. This optimism propelled Bitcoin’s price past $30,000 and led to a staggering inflow of $742 million into Bitcoin funds over several weeks. Current predictions by Bloomberg’s ETF analysts peg the chances of a Bitcoin spot ETF getting greenlit in 2023 at a promising 65%.
The intertwining dynamics of inflation rates, federal decisions, and the burgeoning interest in innovative financial instruments like Bitcoin spot ETFs are shaping the future of cryptocurrency investments. It remains an area to watch closely for both investors and financial analysts.
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