As a seasoned researcher with years of experience studying the intricate dance between traditional finance and cryptocurrencies, I find the recent trends fascinating. The latest Coinshare report underscores the interconnectedness of these two worlds, as the Federal Reserve’s interest rate cut seems to have sparked yet another wave of inflows into the crypto market.
According to a recent report from Coinshare, the cryptocurrency market has seen two successive weeks with investments flowing in, partly because the Federal Reserve lowered interest rates for the first time since 2020.
According to a recent report published by Coinshare on September 23rd, there was an investment of approximately $321 million into cryptocurrency products. Despite this amount being lower compared to the $436 million inflow seen in the previous week, the trend of continuous positive investments remains robust.
Based on the analysis of James Butterfill, head of research at CoinShares, it’s believed that the surge in inflows occurred as a direct response to the Federal Open Market Committee (FOMC) reducing interest rates by 0.5% on the previous Wednesday.
Consequently, the total amount managed increased by 9%, reaching approximately $9.5 billion. This figure represents a 9% rise compared to the previous week’s volume.
Butterfill.
The data in the report indicates that the U.S. accounted for most of the incoming funds, contributing approximately $277 million, while Switzerland was second with around $63.4 million.
Although Brazil received modest investments worth $1.4 million and Australia had no trading activity at all, this was balanced out by large withdrawals from countries like Germany ($9.5 million) and Sweden ($7.8 million) in Europe. Canada also reported withdrawals amounting to $2.3 million, while Hong Kong experienced withdrawals of $1.3 million.
Among the eleven digital assets reviewed, Bitcoin (BTC) experienced the highest influx of approximately $284 million in a week, causing investments in short-Bitcoin to increase by around $5.1 million. Conversely, Ethereum (ETH) has been an exception for five consecutive weeks, with weekly outflows totaling about $29 million.
According to Jean-David Pequignot, who is the Head of Markets at OSL, a Hong Kong-based digital asset platform overseen by regulators, Bitcoin and other cryptocurrencies experienced a surge following the FOMC’s interest rate reduction. However, he pointed out that the committee appears hesitant about making additional reductions.
Additionally, Governor Bowman advocated for a more modest reduction, on the other hand, Chair Powell voiced apprehensions over implementing policies that are too lax.
This occurrence clearly demonstrates that conventional monetary policies can exert a substantial impact on digital assets such as cryptocurrencies. Specifically, reductions in interest rates have tended to increase the value of riskier investments in history.
In simpler terms, “The upcoming US elections are significant, and investors will closely monitor economic data over the next few months to predict the direction of interest rates set by the Federal Reserve.
Pequignot.
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2024-09-23 16:32