Crypto Inflows Surge Following Federal Reserve’s Rate Cut

The cryptocurrency market witnessed a strong surge in inflows for the second consecutive week, fueled by the Federal Reserve’s recent decision to cut interest rates. 

CoinShares’ latest report, released on September 23, highlights inflows of $321 million into crypto investment products, continuing the positive trend following the Federal Open Market Committee’s (FOMC) rate cut.

While lower than the $436 million rebound the previous week, the inflows still represent strong market momentum. According to James Butterfill, head of research at CoinShares, the inflows were largely driven by the FOMC’s decision to reduce interest rates by 50 basis points, marking the first rate cut since 2020.

“As a result, total assets under management saw a 9% growth, and total investment product volumes reached $9.5 billion, up 9% from the previous week,” Butterfill noted.

U.S. Dominates Crypto Inflows as Global Markets React to Rate Cuts

Most of the inflows came from the United States, contributing $277 million. Switzerland followed with $63.4 million. However, other regions, such as Brazil, saw more modest inflows of $1.4 million, and Australia experienced no trading activity. On the other hand, there were notable outflows from countries like Germany, Sweden, and Canada, with $9.5 million, $7.8 million, and $2.3 million in outflows, respectively.

Bitcoin led the charge regarding asset inflows, accounting for $284 million. The influx into short-bitcoin investment products also grew, reaching $5.1 million. Meanwhile, Ethereum continued its five-week streak of outflows, losing $29 million in investment during the same period.

Commenting on the market’s reaction to the rate cut, Pequignot, Head of Markets at Hong Kong’s regulated digital asset platform OSL, said: “The market responded with a rally of bitcoin and other crypto assets to the FOMC rate cut. That said, the committee still appears restrained in pursuing further cuts in tips.” He added that Bowman of the Federal Reserve proposed a more modest cut while Powell voiced his worries over potentially excessive easiness in the monetary policy.

It is worth noting that there are still such features of the financial markets that traditional central bank activities satisfy, as this need persists. It has always been the case that easing monetary policies is suitable for risk-type assets such as cryptocurrencies; the latest case is also exemplary.

Pequignot highlighted that economic parameters should be studied with severe concentration as the President of the United States race moves into full gear. Acknowledging that “A US election is completely in play, and over the next few months, the market will be focused on economic parameters about what point the Fed fund rate will be and moving to.”

The dynamics of these macro changes ensure the reactions of the crypto market. This indicates the fusion of traditional finance and digital assets, which are enjoying rapid traction now.