After a three-week period of relative stagnation, the cryptocurrency market is showing renewed signs of life with a surge in fund inflows, most of which are pouring into Bitcoin (BTC).
This resurgence in interest comes hot on the heels of the release of July’s inflation figures, which were pleasantly surprised by exceeding expectations, Investors King gathered.
Bitcoin Sees Inflows, Reversing Previous Trend
CoinShares, a leading digital asset tracking platform, published its weekly report on crypto fund flows, revealing a total of $28.5 million pouring into these funds in the past week.
A substantial chunk of this influx, around $27 million, found its way into Bitcoin. This marks a significant shift from the previous three weeks during which Bitcoin had faced net outflows of approximately $144 million.
Among other digital assets, Ethereum (ETH) and XRP also saw modest inflows, receiving $2.5 million and $0.5 million, respectively. Notably, XRP has now experienced sixteen consecutive weeks of inflows, witnessing a remarkable 127% growth in assets under management since the start of the year.
Market Sentiment Improves Post-Inflation Data
Experts at CoinShares attribute this improved market sentiment to recent US inflation data, which turned out to be slightly better than anticipated. This data point signifies that the possibility of a rate hike in September has diminished, contributing to a more favorable outlook for cryptocurrencies.
Federal Reserve’s Impact on Crypto Market
The decline of Bitcoin and other digital assets throughout the preceding year can be largely attributed to the aggressive rate hike strategy implemented by the Federal Reserve. The central bank took swift measures to curb soaring inflation, resulting in consistent downturns in the cryptocurrency market.
As the year progresses and the Consumer Price Index (CPI) retracts to a 3.2% year-over-year growth rate, indications suggest that the Federal Reserve’s rate hike campaign might have peaked. This development could indicate an opportune moment for investors to enter the market. According to the CME FedWatch Tool, market expectations indicate an 88% likelihood that the Federal Reserve will maintain interest rates at 5.25% during its upcoming September meeting.
ETF Enthusiasm Fuels Canadian and Swiss Inflows
The Bank of Canada, closely aligned with the Federal Reserve’s policies, is also anticipated to maintain a steady 5% interest rate until the year’s end. Notably, the majority of last week’s crypto inflows, amounting to $24 million, were directed towards Canada’s Purpose ETF, the world’s pioneering Bitcoin spot ETF.
Switzerland also witnessed substantial inflows, totaling $7.9 million. The excitement surrounding the potential approval of a US Bitcoin spot ETF began gaining momentum in June, stimulated by filings from major players like BlackRock and Fidelity. This excitement had a palpable impact on the cryptocurrency market, propelling Bitcoin above the $30,000 mark and resulting in consecutive weeks of substantial fund inflows amounting to $742 million.
Prospects of Bitcoin ETF Approval
Bloomberg’s ETF analysts currently assign a 65% likelihood of a Bitcoin spot ETF gaining approval in 2023, further bolstering expectations of positive market developments.
