Bitcoin ETFs See Biggest Inflows in Nearly Two Months Ahead of Fed Decision

As market expectations for an imminent Federal Reserve rate cut intensify, investors are accelerating their move into the Bitcoin market, driving Bitcoin ETFs to record their strongest inflows in nearly two months last week.

According to digital asset firm K33 Research, global Bitcoin exchange-traded products (ETPs) saw a cumulative net inflow of 20,685 BTC last week, marking the largest weekly inflow since July 22.

The renewed influx has also pushed the total holdings of U.S. spot Bitcoin ETFs to 1.32 million BTC, surpassing the previous record set on July 30.

Data also showed that U.S.-listed Bitcoin ETFs accounted for nearly 97% of the global inflows last week, highlighting a surge in demand for cryptocurrencies ahead of the Federal Open Market Committee (FOMC) meeting.

André Dragosch, Head of European Research at Bitwise Investments, revealed that inflows into Bitcoin ETFs are often "one of the key determinants of Bitcoin's performance," adding that the percentage contribution of ETP flow changes to Bitcoin's performance has reached a historical high.

Analysts at K33 share this view, noting that since the approval of spot Bitcoin ETFs early last year, fund flows have been a significant driver of Bitcoin's price increases. The substantial inflows this time indicate accelerating demand, which could provide further support for Bitcoin's price movement.

Meanwhile, investors currently appear to favor Bitcoin over other crypto assets. Dragosch emphasized that data shows a "rerotation" of investor flows from Ethereum to Bitcoin, particularly when comparing the flow performance of Ethereum ETFs.

"Over the past week, flows into Bitcoin ETFs have surpassed new supply growth by a factor of 8.93 times, a key tailwind for Bitcoin's recent performance," Dragosch stated.

Over the past 30 days, investors have accumulated approximately 22,853 BTC through various products, exceeding the 14,056 BTC of newly issued supply. Bitwise Investments noted in its Monday report that the recent recovery has been fueled by rising risk appetite for Bitcoin.

The Federal Open Market Committee's interest rate decision, due in the early hours of Thursday Beijing time, is expected to set the tone for the next phase of Bitcoin's movement. Historically, Fed rate cuts have tended to boost risk assets, with the cryptocurrency market often reacting more sharply than traditional markets.

If the anticipated 25-basis-point rate cut materializes, it could further drive inflows into Bitcoin ETFs and extend the lead of inflows over supply.

Bitwise analysts also pointed out that while mild inflation data and rate cut expectations are the primary drivers, the rise in risk appetite has also been supported by a series of major cryptocurrency-related initial public offerings (IPOs) and announcements last week.