Crypto Markets Shaken by $600 Million Outflow Amid FOMC Stance

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The world of cryptocurrency was rocked last week when it experienced an abrupt reversal in fortune. After five straight weeks of steady capital inflow, digital asset funds found themselves at the receiving end of net outflows worth a staggering $600 million, as data from CoinShares revealed. Particularly hard-hit were bitcoin and Solana, with the former conceding a massive $621 million and the latter losing a more modest $0.2 million.

The downward trend coincided with bitcoins descending price trajectory throughout the week, worn down by the unexpectedly sturdy stance exhibited by the Federal Open Market Committee (FOMC) during its recent meeting.

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If we delve a little deeper into recent history, a parallel insight emerges. The last time such a run of inflows came to an abrupt halt was on March 22, 2024, a day when the outflow was highest since recording began. That day too had seen a similar exodus of funds – $600 million, following a generous inflow of $3 billion in the preceding week.

Interestingly, the FOMC’s role in this reversal was pivotal. Its meeting on June 11 and 12 held interest rates at a steady 5.25%-5.50%. The unyielding position prompted many crypto investors, who view cryptocurrency as a risky bet, to withdraw their investments seeking safer financial shores.

Digging deeper into the data, it surfaces that the majority of the outflows were from Bitcoin. The leading cryptocurrency saw a drain of $621 million from its funds, with a significant portion of that amount exiting from Spot Bitcoin exchange-traded funds (ETFs) operating in the United States. The bleak sentiment among Bitcoin investors was further highlighted by short Bitcoin products gaining inflows worth an estimated $1.8 million.

Meanwhile, Solana also faced a nettlesome week with its prices spiraling down, forcing its investment funds to release around $0.2 million. A complimentary downtrend was observed in multi-asset products, which encountered outflows approaching $1.1 million.

As the trading volume shrank to $11 billion, considerably less than the estimated $22 billion weekly average, the total assets under management (AuM) receded from over $100 billion to $94 billion over the week.

However, not all cryptocurrencies lamented their fortune; Ethereum basked in an inflow of $13.1 million, riding high on investor anticipation around the potential launch of Spot Ethereum ETFs. BNB, Litecoin, XRP, Chainlink, and Cardano also stood in the inflow column accumulating $0.3 million, $0.8 million, $1.1 million, $0.7 million, and $0.8 million, respectively.

As the dust settles over the recent happenings, what remains clear is how sensitive cryptocurrency markets continue to be to traditional macroeconomic indicators. In such a volatile environment, the dance of outflows and inflows is likely to remain an intriguing spectacle for those with an eye on them.