Crypto Funds Pull in $921M on Fed Rate Cut Optimism

Digital asset investment products saw inflows of $921 million last week, according to CoinShares, as optimism about U.S. interest rate cuts revived investor appetite for crypto-linked funds.

The inflows followed several volatile weeks marked by uncertainty around U.S. fiscal policy and limited macroeconomic data during the ongoing government shutdown.

But investor confidence was buoyed after consumer price index data came in lower than expected, reinforcing hopes that the Federal Reserve will continue its easing cycle. Trading volumes in exchange-traded products (ETPs) held strong at $39 billion for the week, above the year-to-date weekly average of $28 billion.

On prediction market platform Myriad, launched by Decrypt’s parent company Dastan, an overwhelming majority of users expect a 25bps rate cut in October, while they place just a 19% chance on the Fed making exactly two rate changes in 2025.

A long term shift

CoinShares head of research James Butterfill told Decrypt he believed investors moving into crypto ETFs was part of a long term shift.

“Our survey, that we publish every quarter, highlights the top reason for investing is for diversification, with speculation now being only 5th on the list,” he said. “This was very different to 5 years ago, when speculation was the main reason for investing, with this shift to diversification highlighting a longer term outlook on investing in the asset.”

He added that UTXO data highlights that the number of Bitcoin investors holding for over 150 days has risen from 50% in 2018 to 75% today.

Investors are also increasingly sensitive to data such as CPI or payrolls, highlighting how traders and investors are increasingly seeing Bitcoin as a store of value or monetary asset, he said. “In terms of correlations, the correlation is highly varied between Bitcoin and bonds and equities, and monetary policy often influences this,” he added.

“Hawkish policy often prompts a higher correlation to equities, and now a more dovish stance from the Fed has led to generally lower correlations,” Butterfill noted.

The United States dominated regional flows with $843 million in inflows, while Germany posted one of its strongest weeks on record at $502 million. Switzerland, by contrast, recorded $359 million in outflows, though CoinShares attributed this to asset transfers between providers rather than active selling.

Smaller markets such as Hong Kong saw comparatively smaller activity. The city saw just $11.23m in outflows for its Bitcoin ETFs from one fund, BoseraHashkey, on Oct. 22. The same fund saw $1.1 million in inflows on October 20 for its Ethereum ETF, the only movement that week across all the funds in the city.

Bitcoin remains top choice

Bitcoin remained the clear favorite among investors, drawing $931 million in inflows. Cumulative Bitcoin inflows since the Federal Reserve began cutting rates now total $9.4 billion, with year-to-date inflows at $30.2 billion—still below the $41.6 billion logged in 2024.

Ethereum, meanwhile, saw its first outflows in five weeks, shedding $169 million as investors rotated into Bitcoin. Despite the pullback, leveraged Ethereum ETPs continued to see strong demand. Activity in Solana and XRP slowed, with inflows of $29.4 million and $84.3 million respectively, as traders await the anticipated launch of new U.S. crypto ETFs.

“We saw this fervour with Bitcoin and Ethereum, with a kind of “buy on the rumour, sell on the news” approach,” Butterfill said. While this pattern could recur with Solana and XRP ETFs, he added, “the negative effect post event only lasted for a few weeks—with positive sentiment quickly returning.”