September 2, 2024 - Cryptocurrency investment products have experienced major outflows in recent weeks, with the latest report from digital asset management firm CoinShares indicating a total of $305 million in outflows during the week of August 24-31.
According to the report, the outflows were driven by "stronger-than-expected economic data" in the United States. The US Commerce Department reported on August 30 that the Personal Consumption Expenditures (PCE) price index, a key measure of inflation, surged 0.2% month-over-month and was up 2.5% year-over-year.
The PCE report is closely watched by the US Federal Reserve, as it is one of the central bank's preferred inflation indicators. The data hinted at a potential 24 basis point interest rate reduction in September, lowering the probability of a more aggressive 50 basis point cut.
CoinShares noted in its report that the cryptocurrency asset class is expected to become "increasingly sensitive to interest rate expectations as the Fed gets closer to a pivot."
The outflows were primarily driven by US investors, who accounted for $318 million in sell-offs. Other regions saw more modest outflows, with Germany and Sweden posting $7.3 million and $4.3 million, respectively. Switzerland and Canada, on the other hand, saw slight inflows of $5.5 million and $13.2 million, respectively.
Bitcoin-based investment products were hit the hardest, with $319 million in outflows. Short Bitcoin investment products, however, saw a second consecutive week of inflows, totaling $4.4 million – the largest since March 2024.
Ethereum-based crypto investment products also saw outflows, with $5.7 million in net redemptions, continuing a downward trend despite the recent launch of Ethereum exchange-traded funds (ETFs) in the US on July 23, 2024.
The report from CoinShares suggests that the crypto investment landscape is becoming increasingly sensitive to macroeconomic factors, particularly interest rate expectations, as the industry navigates a rapidly evolving economic environment.