Digital assets products soared over the past week amid broader optimism of a pro-crypto administration in the US.
Digital asset products have attracted $2.2 billion in net inflows globally, marking the largest increase since July. The data provided by CoinShares highlights a sharp reversal of the previous trend of outflows. This surge is attributed to rising investor optimism surrounding the upcoming United States elections.
Market participants think the political climate could create good opportunities for digital assets. This may lead to more participation from institutional and retail investors. According to James Butterfill, Head of Research at CoinShares, most of the inflows came from investment funds based in the US, reflecting increasing optimism that a Republican-led government could favor cryptocurrency regulations.
United States Asset Funds Dominate the Surge
The United States saw $2.3 billion in inflows. Canada, Sweden, and Switzerland’s crypto investment products also performed well, recording $20 million, $18 million, and $15 million in inflows, respectively. Meanwhile, Bitcoin Spot ETF saw one of the largest weekly inflows, totaling $2.13 billion due to increasing BTC prices. Short Bitcoin also experienced the largest inflow since March, totaling $12 million.
Additionally, Ethereum, Solana, Litecoin, and XRP saw inflows of $58M, $2.4M, $1.7M, and $0.7M, respectively. However, multi-asset products ended their 17-week streak of consecutive inflows with $5.3 million outflows.
The influx of capital has significantly affected the industry. Trading volumes in digital asset investment products have increased by 30%. This increase in trading activity highlights a growing appetite for exposure to cryptocurrencies and other blockchain-based assets. Likewise, the capital inflows have brought the total Assets Under Management (AUM) in digital asset funds close to the $100 billion mark.
As the US elections approach, investors will closely watch the intersection of politics and digital finance.
Crypto Recovers from Market Crash
Before, crypto investment products’ total AUM fell to $75 billion. This dip successfully cleared off over $20 billion in the correction. However, it recovered in August, reaching $85 billion. The sales of exchange-traded products (ETPs) significantly contributed massively to these vast figures and the recovery.
That same month, crypto investment products recorded inflows worth approximately $176 million. The crypto market crash at that time marked a crucial event for several investors who took the opportunity to diversify their funds. In September, the global crypto investment market experienced $321 million in net inflows across various digital asset products.
The rebound followed two consecutive weeks of outflows. Asset manager giants BlackRock, Fidelity, Bitwise, and Grayscale Investments contributed to the surge. The recovery was also tied to recent developments from the Federal Open Market Committee (FOMC), with its interest rate slash moves.
According to the report, the FOMC’s decision to cut interest rates by 50 basis points boosted market sentiment. Moving forward, there is also an expectation that a 25 basis points rate cut will be implemented in November. This trend has created a more favorable environment for investors and encouraged capital flow into crypto products.
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