There have been positive developments in the crypto investment market following the Federal Reserve’s December 18, 2024 rate cut. The report said this triggered a net inflow of $308 million last week for global digital asset exchange-traded products (ETPs).
This positive development happened despite witnessing intra-week outflows and increased market volatility.
ETPs Outflows and Volatility Challenges
Based on individual asset performance, Bitcoin (BTC) registered $375 million in net inflows, while Ethereum (ETH) added $51 million for the week. However, Solana differed in performance, recording $8.7 million in outflows.
The net inflows suggest that institutional players remain confident and interested in digital assets. According to James Butterfill, Coinshares Head of Research, this is significant as the ETPs overcame macroeconomic conditions.
Butterfill emphasized that multi-asset investment products recorded significant outflows despite these positive highlights. The cumulative outflows by these products amounted to $121 million. According to Butterfill, varied inflows came in for XRP at $8.8 million, Polkadot at $1.9 million, and Horizen at $4.8 million. This suggests that investors in these altcoins have adopted a strategic selective approach to their portfolio.
The Federal Reserve’s Role in Market Dynamics
Meanwhile, last week, the largest single day of outflows were registered. Notably, on December 19, a total of $576 million was recorded, and the outflow of December 20 pushed the cumulative total to $1 billion. Butterfill highlights this development as significant and a pointer to the volatility experienced last week.
However, the Federal Reserve’s news briefing after its meeting on December 18 played a huge role in influencing market dynamics. Besides the rate cut, Fed Chair Jerome Powell’s remarks of a hawkish economic outlook triggered risk sentiments across the financial space. Hence, many, including MARA, a Bitcoin mining company, looked to digital assets as a way out.
Investors’ Approach to the Crypto Investment Product
Meanwhile, the Federal Reserve has revised its 2025 core personal consumption expenditure inflation projection figures from 2.2% to 2.5%. Stakeholders had anticipated a four-rate cut, but only two were implemented for 2025. In November, the Federal Reserve’s interest rate cut significantly impacted digital assets.
Analysts note that the market is in a state where derivatives traders are protecting their positions and betting on price drops for assets. Additionally, the market appears poised for downside volatility. All these could influence asset prices in the coming days.
