Crypto Funds Pull in $921M on Fed Rate Cut Optimism

Core Insights - Digital asset investment products experienced inflows of $921 million last week, driven by renewed optimism regarding U.S. interest rate cuts, which has revived investor interest in crypto-linked funds [1] - The inflows occurred amidst a backdrop of volatility and uncertainty in U.S. fiscal policy, particularly during the ongoing government shutdown [1] - Consumer price index data came in lower than expected, bolstering hopes for continued easing by the Federal Reserve, with trading volumes in exchange-traded products (ETPs) reaching $39 billion, significantly above the year-to-date weekly average of $28 billion [2] Investor Sentiment - A significant majority of users on the prediction market platform Myriad anticipate a 25 basis points rate cut in October, with only a 19% chance of two rate changes by the Fed in 2025 [3] - CoinShares' head of research noted a long-term shift in investor behavior, with diversification now being the primary reason for investing in crypto ETFs, contrasting with five years ago when speculation was the main driver [4] - The percentage of Bitcoin investors holding for over 150 days has increased from 50% in 2018 to 75% today, indicating a shift towards a longer-term investment outlook [4] Market Dynamics - Investors are increasingly responsive to economic data such as CPI and payrolls, viewing Bitcoin more as a store of value or monetary asset [5] - The correlation between Bitcoin and traditional assets like bonds and equities varies significantly, influenced by monetary policy stances [5] - The U.S. led regional inflows with $843 million, while Germany recorded strong inflows of $502 million; however, Switzerland saw outflows of $359 million attributed to asset transfers rather than active selling [6] Regional Activity - Smaller markets like Hong Kong experienced limited activity, with only $11.23 million in outflows from one Bitcoin ETF, while a single Ethereum ETF saw inflows of $1.1 million [7]