After a period of losses, money is flowing back into Bitcoin exchange-traded funds (ETFs) and other crypto investment funds, driven by expectations of a potential interest rate cut from the Federal Reserve. According to CoinShares, a total of $436 million was invested in crypto funds last week, reversing a bearish trend that saw $1.2 billion in outflows, including $726 million the previous week.
The majority of these inflows were directed toward U.S. Bitcoin ETFs, which were launched earlier this year by asset management giants like BlackRock, Fidelity, and Grayscale after receiving approval from the Securities and Exchange Commission (SEC). Despite a strong initial launch, these funds had recently experienced outflows as investors weighed the potential risks amid uncertain U.S. central bank policies.
The surge in Bitcoin ETF investments coincides with shifting market expectations for a significant interest rate cut. Former New York Federal Reserve President Bill Dudley suggested a possible 50 basis point cut ahead of the Federal Open Market Committee’s (FOMC) meeting, which sparked renewed interest in “risk-on” assets like Bitcoin. Such assets tend to perform well in environments of lower interest rates, as they attract investors seeking higher returns.
While Bitcoin ETFs saw a resurgence, other crypto-related funds faced challenges. Ethereum-focused products experienced $19 million in outflows last week, as investor interest in Ethereum ETFs has not been as strong as with Bitcoin. Meanwhile, Solana funds saw positive inflows for the fourth consecutive week, with $3.8 million invested.
The Fed’s upcoming decision on interest rates, currently at a 23-year high, will be closely watched by markets, with the outcome likely to influence investor sentiment toward Bitcoin and other volatile digital assets.
