The digital asset investment landscape continues to thrive, with substantial interest and inflows sustaining a positive trend for the fourth consecutive week.
According to a recent report from CoinShares, the sector saw an influx of $245 million last week, pushing year-to-date (YTD) inflows to a record $20.5 billion. Trading volumes also peaked at their highest levels since May, reaching $14.8 billion for the week, largely driven by the launch of Ethereum ETFs.
Bitcoin Products Maintain Strong Inflows
Bitcoin products have consistently attracted significant investments. Last week alone, Bitcoin saw inflows of $519 million, bringing its month-to-date inflows to $3.6 billion and YTD inflows to an unprecedented $19 billion.
This surge in investment is influenced by the political climate in the United States, especially with campaign comments suggesting Bitcoin could be considered a strategic reserve asset. Additionally, the anticipation of a potential rate cut by the Federal Reserve in September 2024 has bolstered investor sentiment towards Bitcoin.
Ethereum ETFs Drive Interest
The introduction of US spot-based Ethereum ETFs has generated considerable interest, recording some of the highest inflows since December 2020. These newly issued ETFs attracted $2.2 billion in inflows, while trading volumes in Ethereum exchange-traded products (ETPs) increased by an astounding 542%.
However, this influx is partially attributed to Grayscale seeding its new Mini Trust ETF with approximately $1 billion from its existing closed-end trust, explaining the consistent outflows from Grayscale’s legacy trust, which saw $1.5 billion in outflows last week, resulting in a net outflow of $285 million.
Trump’s Bullish Remarks Spark Bitcoin Rally
Former President Donald Trump’s bullish remarks on Bitcoin have invigorated market dynamics, noted Shubh Varma, CEO and Co-founder of Hyblock Capital. During his speech at the Bitcoin conference, Trump proposed the dismissal of SEC Chair Gary Gensler and suggested establishing a strategic Bitcoin reserve, even comparing Bitcoin’s market capitalization to that of gold.
“Such a pro-crypto stance from a major political figure was almost unimaginable just two years ago, signaling a significant shift in the narrative surrounding Bitcoin and its potential future,” Varma said. He also noted the growing institutional interest in Bitcoin further supports this optimistic outlook.
Institutional Adoption Grows
The State of Michigan Retirement System has allocated approximately 5% of its assets under management to Bitcoin ETFs, making it the second state pension fund to embrace this digital asset, following Wisconsin. Additionally, Jersey City’s municipal pension plan, announced by Mayor Steven Fulop, is set to invest in Bitcoin through exchange-traded funds.
Economic Environment Boosts Bullish Sentiment
The broader economic environment also plays a crucial role in shaping the bullish sentiment towards cryptocurrencies. The anticipation of interest rate cuts in September has historically driven investors towards alternative assets like Bitcoin in search of higher returns.
Moreover, market sentiment among retail investors suggests a potential upside. Data from Binance indicates that only 45% of retail accounts are currently long on Bitcoin, a relatively low figure compared to the past 90 days.
“This skew towards short positions is significant, as historically, such an imbalance has often preceded strong upward movements in Bitcoin’s price,” Varma said. “With the majority of retail accounts positioned short, the potential for a short squeeze and subsequent rally is heightened.”
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