There has been a significant escalate in inflows of cryptocurrency investment products this year, reaching an annual record of $29.2 billion, a recent study found report from CoinShares.
Weekly net inflows for the last week alone reached $2.18 billion, driven by various market factors and the political climate in the United States.
Bitcoin leads in terms of inflows, US funds dominate the market
The CoinShares report highlighted that significant inflows, coupled with rising prices of major cryptocurrencies in recent months, have pushed the total value of assets under management in cryptocurrency funds to surpass the $100 billion mark.
This is only the second time cryptocurrency funds have reached this level, last seen in June at $102 billion. Weekly trading volume also increased by 67% to $19.2 billion, representing about 35% of Bitcoin trading volume on major exchanges.
The report noted a clear investor preference for Bitcoin, with Bitcoin-linked investment products accounting for $2.16 billion of total global weekly net inflows.
Last week’s net inflow was mainly driven by U.S. funds, adding $2.23 billion. Other regions such as Canada, Germany and Switzerland saw diminutive outflows, with Canadian funds reporting weekly net outflows of $24.4 million, German funds reporting $20.3 million and Swiss funds reporting $13.8 million.
In addition to standard Bitcoin investment products, the report indicated that $8.9 million flowed into short-traded Bitcoin products, suggesting that some investors are hedging against potential downside risks to Bitcoin’s performance.
In addition to Bitcoin, other assets such as Ethereum have also seen inflows, albeit in much smaller volumes. Ethereum-based investment products saw net inflows of $9.5 million during the week, but the report highlighted that overall sentiment around Ethereum remains less hopeful than for Bitcoin and Solana.
Investor sentiment and market trends shape inflows
Analysis by James Butterfill, head of research at CoinShares, highlights the impact of current political developments in the US on cryptocurrency investment behavior, in particular Bitcoin.
He stressed that the significant inflow of funds earlier in the week was likely driven by optimism about potential regulatory and economic changes under a Republican administration, reflecting the sturdy correlation between market sentiment and political forecasts.
However, the diminutive outflows seen at the end of the week also highlight the market’s sensitivity to changes in survey data, which could impact future inflows if uncertainty persists.
The CoinShares report also showed how this year’s cryptocurrency inflows and price appreciation combined to make 2024 a key year for cryptocurrency investment products.
In comparison, annual inflows tripled the previous record of $10.5 billion set in 2021, demonstrating growing institutional acceptance and participation in the cryptocurrency market.
With these trends in mind, the report suggests that the digital asset investment space remains sturdy, although influenced by a intricate set of factors, from established financial factors to changing political conditions.
Featured image created with DALL-E, chart from TradingView
