Dipping Digital Asset Fund Investments: CoinShares Cites Rising Interest Rate Fears
Summary:
Investments in digital asset funds are on a downward trend, with a $206 million dip reported in the third week of April, led by Bitcoin and Ether funds, according to CoinShares. The investment firm attributed this to investors' concerns about potential US interest rate hikes, which could make low-risk financial tools more attractive. Despite Bitcoin fund outflows, CoinShares doesn't foresee a crash in Bitcoin prices. Bitcoin ETFs' inflows have slowed down since their peak in March, but BlackRock's iShares Bitcoin Trust maintains steady investor interest.
There's been a progressive decline in digital asset fund investments. For the week of April 15-19, a decrease of $206 million was reported by CoinShares, a digital asset investment firm. Bitcoin (BTC) funds experienced the most significant outflows of $192 million, just before the halving event. Ether (ETH), too, witnessed a negative outflow of $34 million for the sixth week in a row. The inflow into blockchain equities is also experiencing a downturn, with the sector observing 11 successive weeks of outflows, accumulating to $9 million. Digital Assets flared a red signal. Reportedly, CoinShares attributed this descent to investor apprehension triggered by potential interest rate hikes in the US, which might boost the appeal of low-risk finance tools over epredictable currencies like cryptocurrencies.
The Federal Reserve had earlier indicated a possible relaxation of its monetary policy by mid-2024, given favorable economic circumstances. However, rising inflation data seem to have thwarted such expectations. The annual Consumer Price Index for March rose by 3.5%, outperforming predictions for the third month in a row. This implies that interest rates might stay elevated until 2025, with federal fund rates currently hovering between 5.25% and 5.50%. As CoinShares pointed out, “There's decreasing enthusiasm from ETP/ETF investors, likely due to predictions of the Federal Reserve maintaining high interest rates for an extended period.”
The weekly trading volume for Bitcoin exchange-traded funds (ETFs) dropped marginally to $18 billion. Nevertheless, CoinShares stated that Bitcoin's fund outflows are not perceived as an opportunity to short the cryptocurrency, suggesting that even though investors are becoming wary of volatility, they don't necessarily foresee a crash in Bitcoin prices. Compared to a month ago, when it was 55%, the ratio of these volumes to Bitcoin's total volumes (which continue to surge) has gone down to 28%, the report noted.
Bitcoin ETF inflows have substantially slackened since their apex in March. However, BlackRock's iShares Bitcoin Trust (IBIT), the most prominent ETF concerning managed assets, kept stable investor interest this month, attracting $1.4 billion in positive inflows as of April 19.
In related news, the magazine announced that one in every six new Base meme coins are fraudulent, and a whopping 91% possess vulnerabilities.
Published At
4/22/2024 9:22:07 PM
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