The cryptocurrency market saw a notable influx of capital for the second consecutive week, driven in part by the Federal Open Market Committee’s (FOMC) recent interest rate cut, according to Coinshare’s latest report. Digital asset investment products recorded inflows of $321 million, continuing a streak of positive momentum, although down from the previous week’s $436 million surge.
The FOMC’s decision to reduce interest rates by 50 basis points marked the first rate cut since 2020, a key factor influencing market optimism. James Butterfill, CoinShares’ head of research, attributed much of the inflows to this policy shift, noting a 9% increase in total assets under management (AuM), which reached $9.5 billion. Butterfill explained, “Last week’s inflow was likely triggered by the FOMC’s decision, which buoyed investor confidence.”
US and Switzerland Lead the Charge
The United States emerged as the primary source of inflows, contributing $277 million, while Switzerland followed with $63.4 million. Brazil saw modest inflows of $1.4 million, while Australia recorded no trading activity. These gains were partially offset by outflows from European markets, with Germany and Sweden seeing outflows of $9.5 million and $7.8 million, respectively. Canada and Hong Kong also experienced outflows of $2.3 million and $1.3 million.
Bitcoin Dominates, Ethereum Struggles
Bitcoin was the clear frontrunner, pulling in $284 million in inflows, which even extended to short-bitcoin investment products, accumulating $5.1 million. In contrast, Ethereum continued its five-week trend of outflows, shedding $29 million, largely driven by investor withdrawals.
Jean-David Pequignot, Head of Markets at OSL, a regulated digital asset platform in Hong Kong, told crypto.news that the FOMC’s rate cut played a significant role in driving up prices for Bitcoin and other cryptocurrencies. However, he noted the central bank remains cautious about future policy changes. “Governor Bowman favored a smaller cut, while Chair Jerome Powell expressed concerns over aggressive policy loosening,” Pequignot added.
The correlation between traditional monetary policy and digital assets has once again been highlighted, as rate cuts typically encourage investment in riskier assets, including cryptocurrencies. Pequignot emphasized that with the upcoming U.S. elections, market participants will be closely monitoring economic indicators to gauge the future direction of the Fed’s policy.
With the current economic backdrop, the market is expected to react to any further signals from the Federal Reserve regarding rate cuts, making the next few months critical for both traditional and digital financial markets.
