Crypto Investment Products Lose $147M as US Rate Cut Optimism Wanes

Key Takeaways

• Crypto investment products recorded minor outflows in the first week of October.
• The outflows were attributed to diminishing chances of a Fed rate cut and stronger job data.
• Multi-asset investment products recorded their 16th week of consecutive inflows.

Crypto investment products experienced $147 million in outflows last week as optimism about a potential interest rate cut waned in the wake of stronger-than-expected job data.

The Labor Department reported that the U.S. economy added 254,000 job s in September, with the unemployment rate ticking down to 4.1%, a sign of a resilient labor market.

Crypto Investment Products Record Minor Outflows

Last week’s outflows marked the end of an impressive three-week inflow streak.

According to CoinShares , investors yanked $159 million out of Bitcoin (BTC) funds, while bearish bets on the asset’s decline attracted $2.8 million in fresh capital.

At the same time, Ethereum (ETH) investment products hemorrhaged $29 million as enthusiasm for exchange-traded funds (ETFs) wilted.

But in a striking contrast, spot crypto markets surged over the weekend, with Bitcoin bursting through the $63,000 barrier and Ethereum soaring above $2,500.

This sudden about-face in sentiment could signal a rebound in inflows to digital investment products in the days ahead.

Multi-Asset Investment Products Record 16th Week of Inflows

While crypto assets experienced a slight hiccup last week, multi-asset investment marked 16 consecutive weeks of inflows, with $29 million in fresh capital pouring in over the past week alone.

This streak of investor confidence began in June, when the crypto market started to rebound, and has since amassed a total of $431 million in inflows over the past four months.

The appeal of these products lies in their diversification, which helps shield investors from the whims of the market.

By spreading risk across a range of assets, investors can offset losses in one area with gains in another.

For instance, when Bitcoin and Ether prices plummet, alternative coins like Solana (SOL), Litecoin (LTC), Ripple (XRP), Cardano (ADA), and Tron (TRX) can pick up the slack, as seen in the past week’s performance.

In a telling sign of this trend, while Bitcoin and Ether-based investment products suffered outflows, their multi-asset counterparts attracted new money, underscoring the allure of a diversified portfolio in turbulent markets.

More Rate Cuts Incoming?

The Federal Reserve’s surprise rate cut last month has set the stage for a potential repeat performance, pending the outcome of key economic data releases. If the consumer price index report, due Oct. 10, comes in strong, the likelihood of further rate cuts diminishes.

However, a dovish turn by the Fed could prove a boon for the crypto market, which responded enthusiastically to September’s rate cut by surging to new heights. Bitcoin and several altcoins reached multi-week highs before geopolitical tensions sent markets tumbling.

A rate cut in October could be the catalyst Bitcoin needs to overcome its post-halving malaise. Conversely, a lack of accommodative monetary policy could exacerbate the outflows from crypto investment products, leaving the market vulnerable to further declines.