17 August 2024
The crypto market continues to be influenced primarily by broader macroeconomic conditions, with the latest US Consumer Price Index (CPI) report providing a glimmer of optimism for risk assets, including cryptocurrencies.
Crypto Awaits Fed’s Move
According to a recent Coinbase report, the slightly softer-than-expected July CPI print of 2.9% year-over-year – the lowest level in three years – has “calmed market concerns and reinforced expectations of impending Fed rate cuts at the September 17-18 Federal Open Market Committee (FOMC).
Per the report, this has been viewed as positive news for risk sentiment, as it may help dispel fears of a potential US recession, which Coinbase believes is more important than the total size of Fed cuts this year.
However, the crypto market has remained range-bound, with Bitcoin (BTC) unable to break through the $61,000 level. Sentiment has slowed due to a lack of crypto-specific catalysts, and perpetual futures funding rates in BTC have turned negative this week, potentially indicating lower trader activity.
In the Ethereum (ETH) ecosystem, gas prices have slumped, which could signal a decline in network activity. On a more positive note, spot Ethereum ETFs in the US have seen inflows this week.
ETF Inflows Signal Strong Institutional Interest
The report also highlighted the growing institutional adoption of crypto, as evidenced by the latest 13-F filings for US spot Bitcoin ETFs. The data, which captures the state of institutional ownership as of June 30, 2024, reveals notable new holders such as Goldman Sachs ($412 million) and Morgan Stanley ($188 million).
The ETF complex saw net inflows of $2.4 billion during this period, despite a drop in total assets under management (AUM) from $59.3 billion to $51.8 billion, due to Bitcoin’s price decline from $70,700 to $60,300.
Nonetheless, Coinbase analysts believe the continued ETF inflows during Bitcoin’s underperformance may be a “promising indicator of sustained interest in crypto from the new pools of capital that the ETFs give access to.”
They also expect the proportion of investment advisor holdings to increase as more brokerage houses complete their due diligence on these funds.
Looking ahead, the report notes that the stage is set for market dynamics to be tested at the upcoming Jackson Hole Economic Symposium, a pivotal event that could sway sentiments and shape the trajectory of crypto markets.
While short-term fluctuations and market slowdowns may dampen immediate enthusiasm, Coinbase highlights the underlying currents of institutional interest and the evolving landscape of ETF inflows that paint a promising picture for crypto prices for the rest of the year.
At the time of writing, BTC is trading at $59,679, regaining the top of the range seen in recent days between $57,000 and $60,000.
Featured image from DALL-E, chart from TradingView.com