$600 Million in Crypto Outflows Recorded Following Fed Meeting
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The world of cryptocurrencies took a big hit last week. Investors quickly pulled their money out of crypto investment funds. In total, over $600 million left these funds. It was one of the largest crypt outflows on record this year.
According to the latest CoinShares market report, industry experts believe the selloff happened because of a recent meeting by the Federal Reserve. The Fed is in charge of setting key interest rates that impact the whole economy.
Many investors were hoping the Fed would hint at lowering rates soon. Lower rates tend to make risky assets like crypto more appealing.
However, the suggested rates may stay higher for longer than expected. This “hawkish” stance seems to have spooked crypto investors.
Bitcoin investment products saw the biggest outflows, losing $621 million. Even “short-bitcoin” products, which bet against the price of bitcoin, saw inflows of $1.8 million.
Crypto Outflows Pull Total Assets in ETPs to $94 Billion
The plunge in crypto fund investment pulled the total assets in these products down to $94 billion. This is a sharp drop from over $100 billion just a week earlier.
While some altcoin funds, like those investing in Ethereum, LIDO, and XRP, did see small inflows, it wasn’t nearly enough to offset the bitcoin losses.
Trading volume of crypto products also remains low compared to earlier this year. Weekly volume averaged just $11 billion, about half of typical levels. However, this is still much higher than the $2 billion per week seen in 2023.
The negative sentiment hit crypto funds across many regions, not just in the U.S. Crypto outflows were seen in Canada, Switzerland, and Sweden, while Germany was a rare exception with a small $17 million in inflows.
The crypto fund exodus underscores how sensitive digital asset prices can be to changes in interest rates and Fed policy. With stubbornly high inflation, many analysts expect rates to stay elevated, which could mean more pain ahead for crypto.
However, the industry has bounced back from selloffs before. Long-term bulls hope that the fundamental appeal of blockchain technology and the potential for crypto to revolutionize finance will eventually prevail, leading the market to new heights.
For now, though, crypto funds are facing their biggest test of investor confidence yet.
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