Bitcoin Sees Surge in Investments Ahead of Potential Rate Cuts

Concerns over possible interest rate cuts in September have driven a surge in Bitcoin-related exchange-traded products (ETPs).

According to a CoinShares report dated August 26, the week of August 18-24 saw $533 million flow into digital asset investment products.

This marked the strongest buying activity in five weeks as investors anticipated rate cuts in the U.S., a sentiment bolstered by Federal Reserve Chair Jerome Powell’s comments on August 21 hinting at a potential reduction by September 2024.

Bitcoin was the standout performer, attracting $543 million in inflows, with BlackRock’s iShares Bitcoin Trust (IBIT) accounting for a significant portion—$318 million. In contrast, Ethereum-related products struggled, losing $36 million during the same period, primarily due to large outflows from Grayscale’s Ethereum Trust (ETHE), despite new Ethereum ETFs still drawing investor interest.

Despite the turbulence in Ethereum, Bitcoin saw its price rise by 8% over the week, from $59,500 to $64,300. However, it remains down 6% over the past month, having previously peaked at $69,900 in late July.

Though the recent crypto inflows were substantial, they didn’t surpass the year’s largest inflows in mid-March, when Bitcoin hit a record high of $73,600. An analysis by Matrixport suggests that the latest Bitcoin rally is largely driven by increased stablecoin creation, particularly Tether, signaling that institutional investors might be playing a bigger role in Bitcoin’s price movements.