Bitcoin ETFs see strong inflows as rate cut expectations rise

Bitcoin (CRYPTO:BTC) exchange-traded funds (ETFs) and other crypto investment products saw a significant rebound last week, attracting $436 million in new inflows. 

This comes after a period of heavy outflows, with investors pulling out $1.2 billion in recent weeks, including $726 million just the week before. 

The renewed interest comes ahead of a key Federal Reserve meeting, where a potential rate cut is anticipated.

According to data from CoinShares, most of the recent inflows were directed toward American Bitcoin ETFs. 

Top asset managers like BlackRock, Fidelity, and Grayscale, who launched these ETFs in January after receiving approval from the Securities and Exchange Commission (SEC), have benefited from this influx of capital. 

"We believe the surge in inflows towards the end of the week was driven by a significant shift in market expectations for a potential 50 basis point interest rate cut on September 18th," the report noted, following comments from former New York Fed President Bill Dudley.

The funds initially gained traction when launched, taking in billions of dollars from investors, but have recently faced outflows as markets reacted to U.S. central bank policy and concerns over “risk-on” assets like Bitcoin. 

However, the renewed optimism around a possible rate cut has reignited investor interest. 

Bitcoin's price has also responded positively, nearing $60,000 last Friday, marking its highest level since early September.

While Bitcoin ETFs are experiencing a resurgence, Ethereum (CRYPTO:ETH) ETFs have faced challenges. 

Despite the SEC approving Ethereum ETFs in May and their subsequent launch in July, these funds have not matched the popularity of their Bitcoin counterparts. 

Last week, investors withdrew $19 million from Ethereum-focused products. 

Meanwhile, funds providing exposure to Solana, the fifth-largest digital coin, continued to see positive flows, with $3.8 million added for the fourth consecutive week.

As the Federal Open Market Committee meets this week, the size of the anticipated rate cut remains uncertain. 

A larger cut could further boost interest in "risk-on" assets like Bitcoin, potentially driving additional inflows into crypto ETFs.

At the time of reporting, the Bitcoin (BTC) price was $57,867.60.