Investors Pull $1.2B From Crypto Funds as Fed Rate Cut Hopes Fade

Crypto Funds

Despite these developments, on-chain data from IntoTheBlock shows that 76% of Bitcoin holders are still in a profitable position.

Crypto products experienced their second consecutive week of outflows, with $584 million leaving the market last week and a total of $1.2 billion over the two weeks. Asset management firm CoinShares suggests this is likely due to investors’ pessimism about the Federal Reserve cutting interest rates this year.

The Federal Reserve’s stance on interest rates is particularly influential. Despite recent rate cuts by the European Central Bank and the Bank of Canada, strong U.S. labor data suggests that the Fed might adopt a more hawkish approach, potentially keeping interest rates high for longer.

Bitcoin (BTC) was the main target of these outflows, with $630 million withdrawn last week. On the altcoin side, Ethereum (ETH) also faced outflows, with $58 million withdrawn. However, some altcoins like Solana, Litecoin, and Polygon saw inflows of $2.7 million, $1.3 million, and $1 million, respectively, after recent price declines.

Interestingly, multi-asset products received $98 million in inflows. This indicates that some investors see the weakness in the altcoin market as a buying opportunity, according to CoinShares analysts.

Regionally, the US led the outflows with $475 million, followed by Canada with $109 million. Germany and Hong Kong also saw outflows of $24 million and $19 million, respectively. In contrast, Switzerland and Brazil experienced inflows of $39 million and $8.5 million, respectively.

Bitcoin Holders Profit Amid Market Turbulence

Bitcoin reserves held by miners have dropped from 1.95 million BTC at the beginning of the year to 1.90 million BTC, the lowest level since 2010. This could cause a shift in the crypto market. Lucas Outumuro, head of research at IntoTheBlock, noted that miners are likely to continue reducing their BTC holdings over time due to halving events, which pressure their profit margins and force them to sell more reserves. This increase in bitcoins being sold has caused a temporary dip in prices, which is seen as necessary to remove less efficient miners from the market.

Despite these developments, on-chain data from IntoTheBlock shows that 76% of BTC holders are currently in a profitable position, while 13% are holding their coins at a loss. Additionally, 11% of holders purchased BTC at prices close to the current trading level.