Bitwise CIO highlights BTC as key risk-on asset as ETF inflows surge amid 50bps rate cut possibility

Mila September 18, 2024

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Key Takeaways

Bitcoin ETFs recorded $502 million in inflows over four trading days amid Fed rate cut speculation.
Fidelity’s FBTC led recent inflows with $175.3 million, outpacing other major ETF providers.

Spot Bitcoin exchange-traded funds (ETF) registered inflows for the fourth consecutive day, as the market considers the possibility of a 50 basis points (bps) rate cut today by the Fed. This suggests that Bitcoin is establishing itself as a go-to tool for investors looking to go risk-on, according to Bitwise CIO Matt Hougan.

The Fed funds futures show a 61% chance of a 50 bps rate cut by the Federal Open Market Committee (FOMC) today, as reported by Reuters.

However, a rate cut as significant as 50 bps would be considered a bearish sign by investors a few weeks ago when the Bank of Japan made a sharp and sudden increase in the country’s interest rates, resulting in a market crash in early August.

The possibility of a substantial cut under different circumstances makes risk assets more attractive to investors, hence Hougan’s remarks.

Over $500 million in inflows

Bitcoin ETFs registered nearly $502 million in inflows over the past four trading days, Farside Investors’ data point out. In the last seven trading days, the inflows for these funds amounted to $603 million.

Thus, Bitcoin ETFs reverted 61% of the nearly $1 billion in outflows registered from Aug. 26 to Sept. 6.

Surprisingly, the inflows registered in the past four days were not dominated by BlackRock’s iShares Bitcoin Trust ETF (IBIT), which only saw $15.8 million of positive net flows.

Fidelity’s Wise Origin Bitcoin Fund (FBTC) took the lead between Sept. 12 and Sept. 17 with $175.3 million in inflows, nearly 35% of all money destined for Bitcoin ETFs in the period. The ARK 21Shares Bitcoin ETF (ARKB) trailed closely with $159.8 million in inflows.

Notably, the Grayscale Bitcoin Trust (GBTC) only saw $20.6 million in outflows since Sept. 12, which helped with the significant net flows.

Possible outflows are incoming

Yet, Bitfinex analysts warned in the latest edition of the “Bitfinex Alpha” report that a sell-off event in the days following the rate cut might happen.

Moreover, there is a “quite high” chance that a surge in volatility will also happen in the next few days. As a result, crypto ETF flows and spot prices will suffer the impact of this movement, which can trigger outflows as per Bitfinex analysts.