Investors piled back into bitcoin
Digital asset investment products saw their biggest inflows since July 2022, according to the latest weekly fund flow report from crypto intelligence firm CoinShares. $117 Million in Capital Entered the Crypto Investment Products Space Bitcoin dominated and accounting for inflows of $116 million.
Short bitcoin products also saw inflows of $4.4 million, reducing monthly inflows Bitcoin products up to $30 million. But it is still a far cry from the month-to-date inflows into long bitcoin products, which last stood at $125 million.
According to CoinShares, total assets under management have jumped to $28 billion, a 43% increase since the November 2022 FTX collapse, mostly due to crypto asset price increases.
Trading volumes are also recovering, the report from the crypto intelligence firm revealed. $1.3 billion worth of products were replaced during the week, which is 17% higher than the year-over-year average. CoinShares pointed out that this remains only around 1.4% of the trading volume seen on trusted cryptocurrency exchanges.
CoinShares said investors continue to prioritize “selective investments,” pointing to the fact that multi-asset investment products saw outflows for the ninth week in a row. Multi-asset funds saw outflows of $6.4 million for the week, taking the month-to-date outflows to $16 million.
Incoming Macro Risks Put the “Bitcoin’s Bottom” Thesis to the Test
The latest report from CoinShares suggests that institutional investors, who favor crypto investment products rather than holding the underlying spot asset, are finally starting to join the rally that has been seen of bitcoin 40% increase in prices this month. Before last week’s surge in purchases of bitcoin investment products, monthly inflows were only a modest $9 million.
The change in sentiment reflects a growing narrative among crypto investors, traders, analysts and commentators that the bear market that characterized 2022 may now be over. This narrative will be tested strongly this week – several important macro events to come could trigger volatility, including Wednesday’s Fed meetingFriday’s US jobs report and the latest ISM PMI survey results.
This week’s US economic data is expected to confirm trends we already know are taking place within the US economy – that the economy is stalling, but the hiring and labor markets are strong enough for now . The real wild card will be Wednesday’s Fed meeting.
Financial conditions have eased in January (US stocks are up while US yields and the dollar are down) on hopes that the Fed will not tighten further, following a widely expected 25 bps rate hike on Wednesday. In fact, given the recent surprise US inflation data, the market’s base case is now that there will be only two more 25 bps rate hikes from the Fed (including Wednesday’s hike).
But this goes against the messaging of several Fed officials in recent weeks, some of whom are still talking about rates going above 5.0% (instead of a peak below 5.0%, as markets were expecting). Huh). Fed Chairman Jerome Powell’s message at the post-meeting press conference will thus be closely scrutinized.
If Powell’s comments turn expectations of a Fed rate hike toward pricing in additional rate hikes in 2022, it could lead to a big drop in risk-on assets like bitcoin. In the near term, bitcoin could easily slide back to test its 21-day moving average and support at the $21,600 level. A break below here would open the doors for a decline towards $20,000.
On-chain / technical indicators still showing bullish signals
But would such a blow be enough to send bitcoin back to its 2022 low of $15,500 or below? The on-chain indicators are screaming no. As discussed in a recent article, a growing confluence of indicators Eight pricing models (looking at network usage, market profitability and balance of money signals) tracked by Glassnode are suggesting that bitcoin may be in the early stages of a bear market recovery.
Alternative Indicators Are Also Brighting Up, Like Bitcoin options market and miner btc flows to exchange, Meanwhile, an analysis of bitcoin’s long-term market cycles also suggests that the world’s largest cryptocurrency by market capitalization may be in the early stages of a nearly three-year bull market.
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