Digital asset investment products have faced a notable decline in recent times, with outflows amounting to $726 million over the previous week. This figure aligns with the largest outflow recorded earlier this year, as reported by CoinShares. The diminished sentiment can be attributed to robust macroeconomic data from the prior week, prompting speculation about a possible 25 basis point interest rate cut by the US Federal Reserve.
Market sentiment did stabilize to some extent later in the week, following disappointing employment data. This development has led to a divided perspective on whether the Fed might opt for a larger, 50bp rate cut. As all eyes turn to the forthcoming Consumer Price Index (CPI) inflation report set for release on Tuesday, the anticipation remains high for potential market impacts.
Employment Data Falls Short of Expectations
The employment data falling below expectations has provided some relief, fueling uncertainties around the likelihood of a larger rate cut. Attention will be keenly focused on the CPI inflation report's implications for the market moving forward.
Should inflation numbers come in lower than anticipated, the possibility of a 50bp rate cut becomes more imminent, potentially influencing the crypto market further. Notably, the recent outflows were predominantly concentrated in the United States, accounting for $721 million out of the total $726 million. Canada also experienced substantial outflows, contributing $28 million to the overall figure.
Conversely, European markets showcased a more positive outlook, with inflows noted in certain regions. Germany led the way in Europe with inflows totaling $16.3 million, followed by Switzerland with $3.2 million in inflows.
bitcoin and ethereum Lead the Digital Asset Outflows Leaderboard
The recent downturn significantly impacted bitcoin, witnessing outflows amounting to $643 million. Interestingly, short-bitcoin products saw minor inflows of $3.9 million, indicating ongoing hedging strategies against potential price drops in the leading cryptocurrency.
ethereum also faced notable losses, with outflows reaching $98 million. A significant portion of these outflows stemmed from the Grayscale ethereum Trust, a significant player in the market. Moreover, the influx from newly issued ethereum-based exchange-traded funds (ETFs) has dwindled, signaling a potential decline in investor confidence in ethereum for the time being.
In another development, VanEck announced the closure and liquidation of its ethereum Futures Exchange-Traded Fund (ETF), with the final trading day scheduled for September 16, 2024. Amidst the general outflows, Solana emerged as a bright spot, attracting the largest inflows of any asset during this period, totaling $6.2 million.
As highlighted in a recent note by QCP Capital, the crypto market has exhibited signs of stabilization following the recent price fluctuations, albeit with elevated implied volatility. Market anticipation remains high leading up to noteworthy events, including the Trump v Harris debate and the CPI release.
Despite the cautious market sentiment, institutions maintain a structural bullish outlook and are leveraging the recent downturn to establish longer-term bullish positions. Noteworthy buying activity has been observed for 28 March 2025 call options, signaling institutional investors' confidence in the current price levels as a strategic buying opportunity.
