The cryptocurrency market continues to be driven primarily by broader macroeconomic conditions, with the latest US Consumer Price Index (CPI) report offering a glimmer of optimism for risk assets, including cryptocurrencies.
Cryptocurrencies await Fed decision
According to a recent Coinbase survey reportJuly’s slightly weaker-than-expected CPI of 2.9% year-on-year – the lowest level in three years – “calmed market concerns and reinforced expectations of an imminent Fed rate cut at the September 17-18 Federal Open Market Committee (FOMC) meeting.”
According to the report, this was seen as positive news for risk sentiment, as it could help allay fears of a potential US recession, which Coinbase sees as larger than the total size of the Fed’s cuts this year.
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However, the cryptocurrency market remained range-bound, with Bitcoin (BTC) failed to break above the $61,000 level. Sentiment slowed due to a lack of crypto-specific catalysts, and BTC perpetual futures funding rates turned negative this week, potentially indicating lower trader activity.
In the Ethereum (ETH) ecosystem, gas prices have dropped, which could signal a decline in network activity. On a more positive note, Ethereum spot ETFs in the US have seen inflows this week.
Inflows to ETFs reflect strong institutional interest
The report also highlighted the growing adoption of cryptocurrencies by institutions, as evidenced by the latest 13-F filings for U.S. spot Bitcoin ETFs. The data, which captures the state of institutional ownership as of June 30, 2024, reveals notable new holders such as Goldman Sachs ($412 million) and Morgan Stanley ($188 million).
The ETF complex saw the net entries of $2.4 billion during this period, despite a decline in total assets under management (AUM) from $59.3 billion to $51.8 billion, due to the decline in the price of Bitcoin from $70,700 to $60,300.
Nonetheless, Coinbase analysts believe that continued ETF inflows during Bitcoin’s underperformance may be a “promising indicator of continued interest in crypto from the new pools of capital that ETFs provide access to.”
They also expect the proportion of investment advisers’ holdings to increase as more brokerage houses complete their due diligence on these funds.
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Looking ahead, the report notes that the stage is ripe for market dynamics to be tested at the upcoming Jackson Hole Economic Symposium, a pivotal event that could influence sentiment and shape the trajectory of cryptocurrency markets.
While short-term fluctuations and market slowdowns While that may dampen immediate enthusiasm, Coinbase highlights the undercurrents of institutional interest and the evolving ETF flow landscape that paint a promising picture for cryptocurrency prices over the remainder of the year.
At the time of writing, BTC is trading at $59,679, returning to the top of the range seen in recent days between $57,000 and $60,000.
Featured image of DALL-E, chart from TradingView.com
