- Bitcoin ETFs saw significant inflows as the market reacted to potential Fed rate cuts.
- BlackRock increased Bitcoin holdings, reflecting growing institutional interest amid changing economic conditions.
Recent trends revealed a remarkable rise in Bitcoin [BTC] Exchange-Traded Funds (ETFs), inflows reached $202.6 million per August 26, according to Farside Investors.
Despite this positive momentum in the ETF market, BTC itself struggled to cross the $65,000 threshold, trading at $62,898 after falling 1.11% in the last 24 hours, as reported by CoinMarketCap.
What is at stake?
This discrepancy highlights broader confusion among investors about the interplay between central banks’ interest rate policies and their impact on the valuation of risk assets such as cryptocurrencies and stocks.
A recent report published on August 26 by CoinShares titled — Digital Asset Fund Flows, to highlight the interaction in the crypto market, suggested
“Last week, digital asset investment products had an inflow of i a total of 533 million USD, which is the largest inflow in five weeks.
Source: CoinShares
For context, this recent surge in Bitcoin ETFs came in the wake of Jerome Powell’s comments at the Jackson Hole Symposium, where he hinted at the possibility of an initial rate cut in September.
This prospect has sparked a renewed interest in risk assets. Despite a slight drop in trading volume compared to recent weeks, activity remained robust, with weekly trading reaching 9 billion.
Impact of Fed rate cut on digital assets
The report further emphasized Bitcoin’s performance, noting,
“Bitcoin was the primary focus as we saw $543m of inflows, interestingly the majority of these inflows were on Friday [23rd August]following the dovish comments from Jerome Powell indicating Bitcoin’s sensitivity to interest rate expectations.”
Source: CoinShares
Needless to say, the report also highlighted Ethereum [ETH] ETFs Noting Significant Pullbacks From Grayscale Ethereum Trust.
This generated $118 million in redemptions and contributed to a total of $2.5 billion in outflows over the past month.
Source: CoinShares
What’s more to it?
In addition, Wall Street expects a significant reduction in Federal Reserve interest rates from 5.33% to 3.33% over the next 18 months.
This expected easing will lower borrowing costs for households, businesses and asset managers, leading to increased liquidity and investment opportunities.
As a result, digital assets are expected to see an increase in value, driven by the wider availability of capital.
When this comes, many institutions have started to rise and are gearing up.
First, BlackRock recently unveiled an updated portfolio for its Strategic Global Bond Fund, revealing an increase in its holdings of iShares Bitcoin Trust shares.
Per As of June 30, the fund had 16,000 shares, up from 12,000 shares reported in May, indicating increasing investment in Bitcoin.
Thus I willIt remains to be seen how the Fed’s interest rate cuts will develop and significantly affect asset prices.