FOMC dot plot results in 600 million flowing out of crypto investments
The value of crypto investment products experienced a significant drop towards the end of last week, following a more hawkish tone from the Federal Open Market Committee (FOMC) and a less optimistic short-term economic outlook.
CoinShares reported a net outflow of $600 million from crypto vehicles such as U.S. Bitcoin (BTC) ETFs after the FOMC meeting, which led to a decrease in investor confidence in risky assets. Trading volumes plummeted from the usual weekly average of $22 billion to $11 billion. This resulted in the largest outflow of capital in over three months and ended a 20-day streak of inflows for spot BTC ETFs on Wall Street.
Bitcoin was particularly affected by macroeconomic factors and FOMC announcements. Investment products tied to the leading blockchain coin experienced significant outflows, with Bitcoin itself dropping over 6% during the week according to TradingView data.
As of the latest update, BTC was trading below $65,500 after briefly reaching $70,000 earlier in the week. On the other hand, altcoins displayed a different trend, attracting capital inflows. Ethereum (ETH) led the way with $13 million in inflows.
Despite the cooling inflation data, the crypto markets remained relatively quiet. The FOMC chose to maintain its funding rates between 5.25% and 5.50%. While the Fed’s projections hint at a potential interest rate cut later in the year, the latest inflation numbers showed signs of improvement.
The U.S. Consumer Price Index (CPI) remained unchanged last month, with year-on-year figures dropping from 3.6% to 3.4% in April. These levels are still below the Fed’s target of 2%. However, the decrease in inflation could be positive for risk assets like cryptocurrencies and could encourage capital flow leading up to an anticipated rate cut by September.
For more insights, keep an eye on the top cryptocurrencies to watch this week: ETH, DAO, ELON.
