Last week, investment in cryptocurrency products achieved an impressive turnaround, with inflows reaching $436 million, partially reversing previous weeks that saw $1.2 billion in outflows, according to CoinShares’ latest weekly report.
Despite the growth in capital, ETF trading volume remained flat at $8 billion, significantly lower than the annual average of $14.2 billion.
What triggered this capital flow?
James Butterfill, head of research at CoinShares, attributed the change to adjusted market expectations for a possible 50 basis point rate cut on September 18.
This comes after comments by William Dudley, former president of the Federal Reserve Bank of New York, at the Bretton Woods Commission's annual Future of Finance Forum in Singapore.
Dudley argued that a 50 basis point cut was necessary, citing the weakness in the US labor market. He stressed that employment risks outweighed inflation concerns, in support of the proposed cut.
Due to these changing sentiments, the US saw a total inflow of $416 million, while Switzerland and Germany recorded $27 million and $10.6 million, respectively. In contrast, Canada saw a total outflow of $18 million during the period.
Bitcoin Grows Strongly While Ethereum Struggles
Bitcoin saw the largest inflow of $436 million, marking a reversal after 10 days of total outflows of $1.18 billion. In contrast, short-Bitcoin products saw outflows of $8.5 million after three consecutive weeks of inflows.
Ethereum faces $19 million in outflows. The decline stems from concerns about Layer-1 profitability following the Dencun upgrade in March. Market observers have noted that Ethereum mainnet revenue has dropped 99% since March 2024.
The rise of Layer-2 (L2) networks, thanks to the cost-cutting Dencun upgrade, has made L2 solutions more attractive. Analysts warn that if this trend continues, L2 networks could become dominant and potentially decouple from Ethereum’s mainnet, especially for consumer applications.
Meanwhile, Solana marked its fourth consecutive week of inflows, totaling $3.8 million. Litecoin and Cardano also saw inflows, totaling around $900,000. Additionally, blockchain stocks saw inflows of $105 million following the launch of several new ETFs in the U.S.
