Digital Asset Inflows Surge 124% to $1.24 Billion Amid Geopolitical Tensions

Digital asset investment products have experienced a remarkable surge in inflows, totaling $1.24 billion over the past week. This marks the tenth consecutive week of positive inflows, pushing the year-to-date (YTD) inflows to a record $15.1 billion. This influx of capital comes at a time of heightened geopolitical tensions, particularly following Israel’s military action against Iran, which sparked fears of a broader conflict and led to a sharp selloff across financial markets, including cryptocurrencies.

Despite the volatility, institutional interest in digital assets has remained robust. James Butterfill, Head of Research at CoinShares, noted that the surge in activity early in the week tapered off later, likely due to the US Juneteenth holiday and emerging reports of US involvement in the Iran conflict. This highlights the resilience of institutional investors who continue to see value in digital assets despite geopolitical uncertainties.

Bitcoin has been the primary driver of capital inflows, attracting $1.1 billion over the past week. This marks its second week of positive inflows, even as prices experienced a correction. Many investors took advantage of the dip to increase their positions, underscoring Bitcoin’s growing appeal as a macroeconomic hedge. US-based spot Bitcoin exchange-traded funds (ETFs) played a central role in this flow, attracting $1.02 billion in net inflows. BlackRock’s iShares Bitcoin Trust (IBIT) stood out with $1.23 billion in weekly inflows, bringing the total assets under its management to more than $74 billion. Meanwhile, short-Bitcoin products saw minor outflows of $1.4 million, suggesting a drop in bearish sentiment.

Ethereum has also continued its strong performance, extending its inflow streak to nine consecutive weeks. The digital asset saw $124 million in new inflows last week, pushing its total to $2.2 billion since mid-April. Spot Ethereum ETFs also played a significant role in the inflow streak, with the nine products logging inflows on 25 of the past 30 trading days, totaling nearly $1.5 billion. Market observers have linked ETH’s inflow rise to several key factors, including the recent Pectra upgrade and increasing institutional interest in the crypto.

Other altcoins also showed resilience by attracting modest inflows last week. Solana saw $2.78 million in new capital, while XRP brought in $2.69 million, reflecting continued but cautious appetite for alternative Layer 1s. This trend underscores the growing diversification of institutional portfolios, as investors seek to balance their exposure to different digital assets.

In summary, the surge in inflows for Bitcoin and Ethereum, despite rising geopolitical risks, highlights the enduring appeal of digital assets to institutional investors. The continued interest in these assets, even amidst market volatility, suggests that they are increasingly being viewed as a viable component of diversified investment portfolios. The resilience of these digital assets in the face of geopolitical uncertainties underscores their potential as a hedge against macroeconomic risks, further solidifying their position in the financial landscape.