Digital Asset Funds See Second Consecutive Week of Inflows: CoinShares

As a seasoned researcher with a knack for deciphering market trends, I find the recent surge in digital asset investment products intriguing. The U.S. Federal Reserve’s 50 basis-point interest rate cut seems to have played a significant role, as it’s been four years since we last saw such a move.

Last week saw digital asset investment products register their second consecutive week of investments, infusing a total of approximately $321 million, as reported by the crypto asset manager, CoinShares.

CoinShares ascribes the positive performance to the 0.5% decrease in interest rates by the Federal Reserve, marking the first such reduction in borrowing costs by the U.S. central bank in the past four years.

In this past week, investments in Bitcoin-linked financial products surged with approximately $284 million, while similar investments for Ethereum saw a withdrawal of around $29 million. This marks the fifth consecutive week that Ethereum-based products have experienced outflows. Interestingly, despite this trend, Ethereum – which is the second largest cryptocurrency by market value – posted gains following the Federal Reserve’s recent move.

On Monday, CoinShare stated that the situation is being caused by continuous withdrawals from the existing Grayscale Trust, with minimal new investments coming in from the recently launched ETFs.

Exchange-traded funds (ETFs) based on ether have consistently lagged behind bitcoin ETFs in terms of performance since they were listed in the U.S. in July. Over their initial five weeks of trading, these ether ETFs experienced a net outflow of $500 million, whereas bitcoin ETFs saw over $5 billion in inflows during their first five weeks.

JPMorgan explained that Bitcoin has an edge due to its early adoption, as well as the fact that Ethereum-based investment products don’t offer a ‘staking’ feature, and their lower liquidity makes them less attractive for institutional investors.