Following a hawkish FOMC meeting and a cautious short-term economic outlook, the assets under management (AUM) in crypto investment products experienced a significant decline late last week.
CoinShares reported a net outflow of $600 million from crypto vehicles such as U.S. Bitcoin (BTC) ETFs, as investor confidence in risk assets was shaken by the Federal Open Market Committee (FOMC) meeting. Trading volumes dropped from the usual weekly average of $22 billion to $11 billion. This led to the largest capital outflow in over three months, breaking a 20-day streak of inflows for spot BTC ETFs on Wall Street.
Bitcoin bore the brunt of the macroeconomic factors and FOMC data. Investment products backed by the leading blockchain coin witnessed the biggest outflows in the market, with Bitcoin itself losing over 6% over the course of the week according to TradingView.
At the time of writing, BTC was trading below $65,500, having previously surged towards $70,000 earlier in the week. In contrast, altcoins showed a different trend to Bitcoin and BTC products, attracting capital inflows. Ethereum (ETH) led the way with $13 million in inflows.
Despite cooling inflation, the crypto markets remained subdued. The FOMC opted to keep its funding rates within a range of 5.25% to 5.50%. While the Fed’s dot plot hinted at a potential interest rate cut later in the year, the monthly and yearly inflation figures showed an improvement in the market environment.
The U.S. Consumer Price Index (CPI) remained flat last month, with the year-on-year numbers declining from 3.6% in April to 3.4%. These levels are still below the Fed’s 2% target. However, the cooling inflation data could be beneficial for risk assets like cryptocurrencies, encouraging capital inflows in anticipation of a rate cut expected by September.
Overall, despite the challenges posed by the FOMC meeting and economic outlook, the crypto market continues to attract attention and investment opportunities.