CoinShares: Digital asset investment products saw an inflow of $1.06 billion, reversing four consecutive weeks of outflows.

According to CoinShares' latest weekly report, the total inflow of funds into digital asset investment products reached $1.06 billion last week, reversing the previous trend of four consecutive weeks of outflows (with a cumulative outflow of up to $5.7 billion). The shift in market sentiment stemmed from comments made by Federal Reserve (FED) Open Market Committee member John Williams, who stated that monetary policy remains tight, boosting market expectations for a rate cut this month.

Massive Reversal After Losing 5.7 Billion All Around: Interest Rate Cut Expectations Ignite the Market

(Source: CoinShares)

Last week, the total inflow of funds into digital asset investment products reached 1.06 billion USD, reversing the previous four weeks of outflows (which totaled as high as 5.7 billion USD). This dramatic turnaround is extremely rare in the digital asset investment market and usually requires a strong catalyst to occur. The shift in market sentiment stems from comments made by Federal Reserve Open Market Committee member John Williams, who stated that monetary policy remains tight, boosting market expectations for a rate cut this month.

Why is John Williams' statement so important? As the president of the New York Federal Reserve Bank, Williams has a permanent vote in the FOMC and is one of the most influential decision-makers in the Federal Reserve. When he hinted that the policy remains tight and may lower interest rates, the market immediately interpreted it as a strong signal for a rate cut in December. Lowering interest rates means reduced borrowing costs and increased liquidity, which is favorable for risk assets including cryptocurrencies.

Due to the impact of the Thanksgiving holiday, the trading volume of digital asset ETPs this week was only $24 billion, a stark contrast to the record $56 billion trading volume of the previous week. This sharp decline in trading volume is attributed to seasonal factors, as many institutional traders and market makers take vacations during the Thanksgiving holiday, resulting in a significant drop in market liquidity. However, even in a low liquidity environment, digital asset investment products still achieved a net inflow of $1.06 billion, indicating that the momentum of capital inflow remains extremely strong.

In terms of regional distribution, despite the Thanksgiving holiday, the United States still recorded an inflow of $994 million last week, accounting for 94% of the total inflow. This indicates that the demand for digital assets among American investors is extremely strong, remaining active even during the holiday period. The inflows from Canada ($97.6 million) and Switzerland ($23.6 million) are particularly notable, suggesting that investors in these two regions are also actively allocating digital assets. In contrast, Germany is one of the few countries that experienced capital outflows, totaling $57.3 million, which may reflect a cautious attitude among European investors towards crypto assets.

Digital Asset Investment Product Fund Flows

Total Inflow: 1.06 billion USD (reversing a consecutive outflow of 5.7 billion for four weeks)

United States: 994 million USD (accounting for 94%)

Canada: 97.6 million USD

Switzerland: 23.6 million USD

Germany: Outflow of 57.3 million USD

BTC, ETH, XRP three giants: 461 million, 308 million, 289 million

Last week, Bitcoin saw an inflow of $461 million, as investors reversed their previous expectations of further price declines, with outflows from short Bitcoin ETPs reaching $1.9 million. As the largest category of digital asset investment products, the $461 million inflow accounted for 43% of total inflows. This inflow occurred against the backdrop of Bitcoin's price rebounding from below $90,000, indicating that investors find the current price attractive.

The outflow of $1.9 million from short Bitcoin ETPs is another important signal. These products allow investors to short Bitcoin, and when funds flow out, it means that bearish investors are closing their positions. This kind of short exit often indicates that prices are about to rebound, as the potential selling pressure has decreased.

Ethereum also benefited from the improvement in market sentiment, with an inflow of $308 million last week. The inflow for Ethereum accounted for 29% of the total inflow, demonstrating its solid position as the second largest crypto asset. The $308 million inflow marks the best performing week for Ethereum digital asset investment products recently, reflecting investor confidence in the Ethereum ecosystem and the upcoming upgrades.

XRP has made history. XRP set the record for the largest single-week inflow ever, totaling $289 million, with inflows over the past six weeks accounting for 29% of its managed asset size, which may be related to the recent launch of ETFs in the U.S. A single-week inflow of $289 million is unprecedented for XRP, indicating that the launch of the XRP ETF has indeed unleashed pent-up institutional demand.

The inflow over the past six weeks accounted for 29% of AuM, a truly astonishing figure. This means that the scale of XRP digital asset investment products has grown by nearly one-third in just six weeks. This growth rate far exceeds that of Bitcoin and Ethereum, indicating that XRP's popularity among institutional investors is rapidly increasing. This phenomenon aligns closely with the conclusion of the SEC lawsuit against XRP and the launch timing of the XRP ETF, demonstrating the importance of legal certainty and product availability for institutional funds.

In contrast, Cardano experienced a capital outflow of $19.3 million, accounting for 23% of its AuM. This large-scale outflow indicates that investor confidence in Cardano is declining. A 23% outflow of AuM means that nearly a quarter of the funds were withdrawn within a week, which is catastrophic for any asset. Cardano's predicament may stem from its slow ecosystem development, lack of killer applications, and being at a disadvantage in competition with Solana, Ethereum, and others.

Structural changes behind the inflow of 1.06 billion

The significance of the inflow of 1.06 billion USD into digital asset investment products lies not only in the figure itself but also in the structural market changes it reveals. First is the return of institutional investors. A consecutive outflow of 5.7 billion USD over four weeks shows that institutional investors significantly withdrew from the digital asset market between the end of October and November. This withdrawal may be based on concerns about the macro environment, judgments regarding the overvaluation of crypto assets, or year-end asset allocation adjustments.

However, John Williams' dovish remarks changed everything. When The Federal Reserve (FED) officials released signals for interest rate cuts, institutional investors quickly adjusted their strategies and reallocated digital assets. The $1.06 billion inflow in a single week shows that this strategy shift was large-scale and swift. This also proves that institutional investors are extremely sensitive to The Federal Reserve (FED) policies, as a single word from the FED could trigger billions of dollars in capital flows.

Secondly, the expansion of the types of digital asset investment products. The record inflow of $289 million into XRP is largely attributed to the launch of the XRP ETF. This demonstrates the importance of product innovation for capital inflow. When investors have more choices, the overall capital inflow also increases. In the future, with the launch of the Solana ETF and other mainstream coin ETFs, the market size of digital asset investment products may further expand.

Third is the absolute dominance of the U.S. market. Of the $994 million inflow, the U.S. accounted for 94%. This concentration indicates that the U.S. remains the center of global cryptocurrency asset investment. The acceptance of digital assets by U.S. investors, the improvement of the regulatory environment in the U.S. (especially the settlement between XRP and the SEC), and the abundance of U.S. ETF products have jointly contributed to this dominance.

In terms of trading volume, while the 24 billion dollars is lower than the previous week's 56 billion dollars due to holidays, it still represents a healthy level. This trading volume indicates that the digital asset investment product market remains active, with investors actively adjusting their positions. When trading volume is accompanied by net capital inflows, it usually signals the continuation of an upward trend.