Crypto investment products witnessed a significant uptick last week, with inflows totaling $436 million, a welcome reversal from previous outflows amounting to $1.2 billion, as reported by CoinShares.
Despite the increase, ETF trading volumes remained stagnant at $8 billion, significantly below the yearly average of $14.2 billion.
Factors Driving the Inflows
James Butterfill, CoinShares’ head of research, linked this shift to evolving market expectations of a potential 50 basis point interest rate cut on September 18.
These sentiments were fueled by remarks from William Dudley, former president of the Federal Reserve Bank of New York, during the Bretton Woods Committee’s annual Future of Finance Forum in Singapore. Dudley advocated for a 50 basis point cut, citing a weakening US labor market and emphasizing job risks over inflationary concerns.
Following these changing dynamics, the US witnessed inflows of $416 million, while Switzerland and Germany attracted inflows of $27 million and $10.6 million, respectively. However, Canada experienced outflows amounting to $18 million during the same period.
Bitcoin’s Surge vs. Ethereum’s Struggles
Bitcoin recorded the largest inflows at $436 million, reversing a ten-day outflow trend totaling $1.18 billion. Conversely, short-Bitcoin products saw outflows of $8.5 million after three consecutive weeks of inflows.
Ethereum faced outflows of $19 million, stemming from concerns about the platform’s profitability post March Dencun upgrade. Observers noted a staggering 99% decline in Ethereum’s mainnet revenue since March 2024.
The rise of Layer-2 (L2) networks, bolstered by the Dencun upgrade’s reduced fees, has made L2 solutions more attractive. Analysts warn that continued growth in L2 networks could potentially overshadow Ethereum’s mainnet, especially for consumer applications.
Meanwhile, Solana saw its fourth consecutive week of inflows totaling $3.8 million. Litecoin and Cardano also experienced inflows, amounting to approximately $900,000 combined.
Additionally, blockchain equities attracted inflows of $105 million due to the introduction of new ETFs in the US.
