Large Capital Inflows into Bitcoin and Ethereum
According to the latest data, Bitcoin ETFs attracted $460.7 million in investment inflows over the past week. However, the biggest highlight belongs to Ethereum ETFs, which saw an enormous inflow of over $2.85 billion, the highest ever, surpassing the record set in July.
Bloomberg reports that the total trading volume of Bitcoin and Ethereum ETFs reached $40 billion last week, setting a new record for this market.
ETF funds play a crucial bridging role, allowing large institutional investors in the US to access Bitcoin and Ethereum without directly holding these cryptocurrencies. The continuous inflow of capital into this product group reflects a strong and sustainable demand from Wall Street for BTC and particularly ETH.
The cryptocurrency market has clearly benefited from this wave of institutional investment. Bitcoin set a new all-time high (ATH) of nearly $124,500 last week, while Ethereum surged to $4,770—its highest level since 2021 and just 2% away from its ATH of $4,878.
Driving Factors
- Favorable Policies from the Trump Administration: Investor optimism has been bolstered by encouraging policies from the Trump administration regarding the cryptocurrency sector. The latest move allows pension funds to invest in crypto, opening a massive source of capital from this area.
- Positive Inflation Data: The recently released CPI index for July in the US fell within forecasts, reinforcing expectations that the Federal Reserve (Fed) will cut interest rates in the upcoming September meeting, creating favorable conditions for high-risk assets like cryptocurrencies.
- Corporate Treasury Trend: The trend of companies establishing crypto treasuries has driven significant price increases for many cryptocurrencies, turning digital assets into an attractive investment channel for both businesses and individual investors.
Risks to Watch
- Warning Signals from PPI Data: Following a series of positive news, the July PPI (Producer Price Index) data in the US exceeded all expectations, raising concerns about inflation and leading to a sharp decline in the crypto market over the weekend. This resulted in a significant sell-off of Bitcoin and Ethereum ETFs on August 15 as investors took profits.
- Risk of Correction After Rapid Gains: Many experts warn that after two months of strong growth, the market may undergo a correction as FOMO (fear of missing out) sentiment begins to cool.
- Sustainability of the Crypto Treasury Trend: Some analysts have pointed out weaknesses in the trend of corporations establishing crypto treasuries, along with concerns about the true motives behind these decisions.
Factors to Monitor
- ETF Inflows as a Lagging Indicator: While inflow/outflow data for ETFs is the most visual measure of US institutional interest in Bitcoin and Ethereum, it remains a lagging indicator—captured only after price movements have occurred.
- Verification of Actual Transactions: US public companies continuously announce purchases or fund setups for BTC, ETH, and other altcoins. However, it is essential to verify whether these transactions have genuinely taken place to accurately assess market demand.
- Response to Fed Policies: Monitoring market responses to macro news regarding the Fed’s potential interest rate cuts will help determine whether the recent price increases fully reflect expectations for rate adjustments.
With these positive yet challenging developments, the cryptocurrency market is entering a critical phase where the balance between opportunity and risk will dictate its direction in the near future.
