Crypto News Today- $600 Million Withdrawn from Crypto Investments Following Fed’s Hawkish Shift
Crypto News– Last week, crypto investments saw significant outflows, reaching levels not seen since March. This shift occurred in response to the recent Federal Open Market Committee (FOMC) meeting.
As a result, the potential for Bitcoin’s price to rise appears constrained, with investors becoming more risk-averse.
Crypto Investments See $600 Million in Outflows
Last week, digital asset investment products experienced outflows of $600 million, a level not seen since March 22, according to a CoinShares report. Bitcoin bore the brunt of these outflows, losing $621 million. In contrast, altcoins like Ethereum (ETH) and Ripple (XRP) saw net positive inflows, with Ethereum gaining $13 million and Ripple $1 million.
These outflows and recent price sell-off saw total assets under management (AuM) fall from above $100bn to $94bn over the week. The outflows were entirely focused on Bitcoin, seeing $621m outflows; the bearishness also prompted $1.8m inflows into short-bitcoin.
CoinShares analysts reported
CoinShares analysts attribute these outflows to the US Federal Reserve’s unexpectedly hawkish stance during last week’s FOMC meeting. This shift came after investors briefly celebrated the softer US Consumer Price Index (CPI) on June 12, which had helped digital assets regain some ground. However, hopes for a more accommodative policy were quickly dashed by the Fed’s announcement, leading to the sharp reversal in sentiment.
Ethereum Leads Altcoins in Positive Inflows
As reported, Ethereum saw up to $13 million in positive inflows, avoiding the negative trend affecting the Bitcoin market. The sentiment around Ethereum remains bullish, fueled by speculation that ETH spot ETFs will be launched soon. Bloomberg analyst Eric Balchunas anticipates that these financial instruments will debut on July 2.
Balchunas’ optimism follows a statement from US Securities and Exchange Commission (SEC) Chair Gary Gensler, who confirmed that ETH spot ETFs would be introduced over the course of this summer.
During a Senate hearing last week, Gensler mentioned that the 19b-4 forms approved in May were submitted by stock exchanges planning to list these ETFs. He also noted that the registration process for issuers is still ongoing but expressed hope that it would be completed by summer’s end.
FAQs
What does “hawkish shift by Fed” mean?
A “hawkish shift by Fed” refers to the Federal Reserve adopting a more aggressive stance on monetary policy, often indicating higher interest rates to combat inflation. This can lead to reduced liquidity in the markets and higher borrowing costs, which may negatively impact investment in riskier assets like cryptocurrencies.
Why did the Fed’s hawkish shift trigger a $600 million outflow from the crypto market?
The Fed’s hawkish stance likely led to concerns among investors about the potential for higher interest rates and reduced liquidity. This can make riskier investments, such as cryptocurrencies, less attractive, prompting investors to pull their money out of the crypto market.
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