As a seasoned researcher who has witnessed the rollercoaster ride of the crypto market for several years now, I can’t help but feel a sense of deja vu as I observe this recent correction. The market’s volatility is like a fickle lover, always keeping us on our toes and testing our patience.
In simple terms, the recent downturn in the market last December led to a substantial decrease in the value of digital investment products managed by Exchange-Traded Products (ETPs). The total amount of assets under management for these ETPs dropped by approximately $17.7 billion.
Based on a December 23rd report by CoinShares, there was an outflow of more than $1 billion from digital asset funds between December 19th and 20th. This could be due to anticipation of a slower rate of monetary relaxation in the upcoming year.
On December 18th, the Federal Open Market Committee (FOMC) of the U.S. Federal Reserve decided to lower the federal funds rate by 0.25%, resulting in a new target range of 4.25% – 4.50%. This is the lowest federal funds rate since February 2023.
Initially, we were expecting four 25-basis-point rate cuts in 2025. But, recent forecasts suggest a more conservative strategy, with predictions for just two such reductions instead.
Regardless of economic instability and price adjustments, digital asset investment funds ended the week with a collective inflow of $308 million. According to CoinShares’ report, although outflows might seem concerning, they represent only 0.37% of the total worth of crypto funds.
Related: BTC price risks $20K crash: 5 Things to know in Bitcoin this week
ETPs flow breakdown
During the last week, most of the withdrawals were focused in foreign markets and diversified investment products. Over the period from December 16th to 20th, Germany, Sweden, and Switzerland collectively experienced outflows totaling $212 million. Similarly, Canadian markets witnessed a withdrawal of approximately $60 million.
Positively speaking, the United States received an accumulation of approximately $567 million, with additional contributions of around $16 million from Brazil and $10 million from Australia.
Last week, Bitcoin (BTC) attracted the most inflows, bringing in approximately $375 million, closely followed by Ether (ETH) with around $51 million in inflows. However, multi-asset products experienced a net outflow of about $121.4 million, while Solana (SOL) saw outflows totaling $8.7 million.
“Bitcoin, despite the intra-week outflows, still saw net inflows for the week totaling US$375m, with little activity from short-bitcoin investors.”
Bitcoin’s price decreased from approximately $106,000 on December 16 to $93,370 on December 20, representing a decline of around 10.5% over that period. However, it is important to note that the cryptocurrency still boasts a year-to-date increase of 115%.
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2024-12-23 22:14