Last week marked a significant shift in the crypto investment landscape, with a notable inflow of $436 million in investment products, partially compensating for previous weeks’ outflows which totaled $1.2 billion, as reported by CoinShares.
Despite this resurgence in inflows, trading volumes for ETFs remained stable at $8 billion, which is considerably lower than the average yearly volume of $14.2 billion.
Factors Behind the Influx
According to James Butterfill, the head of research at CoinShares, the influx of funds can be attributed to shifting market sentiments regarding a potential 50 basis point interest rate cut anticipated on September 18.
This speculation gained momentum following comments from William Dudley, former president of the Federal Reserve Bank of New York, during the Bretton Woods Committee’s annual Future of Finance Forum held in Singapore. Dudley suggested a 50 basis point cut was necessary, pointing to a declining US labor market and arguing that job security concerns outweighed inflationary pressures.
The sentiment shift resulted in substantial inflows within the US, totaling $416 million, while Switzerland and Germany also saw inflows of $27 million and $10.6 million, respectively. However, Canada recorded outflows of $18 million during the same time frame.
Market Performance: Bitcoin vs. Ethereum
Bitcoin led the inflows with a remarkable $436 million, marking a significant reversal after a streak of outflows totaling $1.18 billion over ten days. In contrast, short-Bitcoin products experienced outflows of $8.5 million following three weeks of inflows.
On the flip side, Ethereum faced outflows reaching $19 million. This decline is largely attributed to concerns over the profitability of Layer-1 following the March Dencun upgrade, which has led to a staggering 99% decrease in Ethereum’s mainnet revenue since March 2024.
The rise of Layer-2 (L2) networks has made L2 solutions increasingly attractive, particularly following the Dencun upgrade which resulted in lower transaction fees. Analysts caution that if this trend continues, L2 networks may become the preferred choice, potentially diverting attention away from Ethereum’s mainnet for consumer applications.
Meanwhile, Solana achieved its fourth consecutive week of inflows, reporting a total of $3.8 million. Both Litecoin and Cardano attracted inflows, collectively amounting to approximately $900,000.
Additionally, blockchain equities witnessed inflows of $105 million following the launch of several new ETFs in the United States.
