Digital asset investment products have experienced a significant rebound recently, with inflows totaling $436 million after a period of outflows amounting to $1.2 billion. This turnaround is noteworthy and is linked to changing market expectations, particularly the possibility of a 50-basis-point interest rate cut expected on September 18. Former NY Federal Reserve President Bill Dudley's comments have fueled speculation surrounding this potential rate cut, as reported in a recent CoinShares analysis.
U.S. Leads Regional Inflows
Although ETF trading volumes remained steady at $8 billion, below the year's average of $14.2 billion, regional inflows showed strength. In this regard, the U.S. emerged as the frontrunner, attracting $416 million in inflows. Switzerland and Germany followed with $27 million and $10.6 million, respectively. However, Canada experienced minor outflows of $18 million.
bitcoin, in particular, garnered the most investor interest, with $436 million in inflows following a 10-day streak of outflows amounting to $1.18 billion. This influx of investment is a positive sign for the digital asset market.
Another significant development was observed in spot bitcoin ETFs, which saw a surge in inflows on Friday, with net purchases reaching $263 million. This marked the largest single-day inflow since July 22, reflecting growing investor confidence in the cryptocurrency.
On the other hand, short-bitcoin flows experienced a reversal, with $8.5 million in outflows after three consecutive weeks of inflows. ethereum, however, continued to struggle with $19 million in outflows, possibly due to concerns regarding Layer 1 profitability.
Meanwhile, Solana enjoyed its fourth consecutive week of inflows, totaling $3.8 million. Additionally, blockchain equities saw $105 million in inflows, driven in part by the launch of new ETFs in the U.S. market.
crypto-market-dips-after-trump-assassination-attempt">crypto Market Dips After Trump Assassination Attempt
The cryptocurrency market faced a sharp downturn following a second assassination attempt on former U.S. President Donald Trump. This event, coupled with the liquidation of approximately $70 million in long positions before the Asia trading session opened, led to a significant drop in market prices.
According to QCP Capital, the thin liquidity exacerbated this downward move, highlighting the vulnerability of the market to external events. Despite the bearish start, BTC managed to rally by 13.8% during the same week as Trump's first assassination attempt on July 13, indicating the market's resilience in the face of adversity.
This week is marked by several key events that could impact the crypto market significantly. The ongoing Token2049 crypto conference and the upcoming Federal Open Market Committee (FOMC) meeting on September 18 add to the uncertainty in the market.
The FOMC meeting will determine the possibility of an interest rate cut, with expectations divided between a 25 and 50 basis points reduction. The likelihood of a 50bps cut has surged from 30% to 59% in just a week, increasing market volatility. Implied volatility for BTC and ETH rose accordingly, reflecting market participants' concerns.
Amidst the current market downturn and a preference for put options, there is an opportunity to capitalize on a bullish trade for the fourth quarter using a zero-cost ERKO Seagull strategy. This strategy aims to leverage options pricing imbalances to manage risks effectively while maximizing potential returns.
Under this strategy, a trader would purchase a 70k call option with a 100k knock-out, while simultaneously selling a 50k put option expiring on November 8, 2024. This trade structure offers a zero cost of entry but has the potential for substantial payouts if bitcoin's spot price approaches the $100k level at expiry.
With the current spot price at $58,300, this trade presents an attractive opportunity to position for a potential market rebound heading into the fourth quarter, considering the prevailing market conditions and upcoming events that may impact digital asset prices.
