Money Keeps Flowing into Crypto, DXY Index Boosts Bitcoin

Money Continues to Flow into the Crypto Market

Crypto products continue to attract investment for the fourth consecutive week, driven by growing anticipation for the approval of a Bitcoin exchange-traded fund (ETF) in the United States. According to CoinShares’ weekly fund flows report, Bitcoin products led the way in attracting investments, capturing 84% of the total funds.

CoinShares’ fund flows report for the week ending October 20th disclosed that a total of $179 million flowed into digital asset investment products, contributing to a cumulative assets under management of $33 billion.

Of these inflows, $55.3 million, or 84%, were directed towards Bitcoin investment products, bringing the year-to-date Bitcoin product inflows to $315 million.

It seems that the anticipation of a spot #Bitcoin ETF has prompted further inflows for the 4th consecutive week. Here is our analysis with @Jbutterfill.

🟢 Week 43 inflows: US$66m

🔎 Inflows are relatively low in comparison to June’s @BlackRock announcements, suggesting more… pic.twitter.com/6AkDGQJVOh

— CoinShares (@CoinSharesCo) October 23, 2023

James Butterfill, the Head of Research at CoinShares, noted that while these recent inflows can be attributed to the anticipation surrounding a spot Bitcoin ETF launch in the United States, they fall short of the levels witnessed earlier this year when BlackRock first announced its intention to create a spot Bitcoin ETF.

In June, during a four-week span, the sector saw a staggering $807 million inflow, suggesting that investors are currently adopting a more cautious approach.

On the other hand, Solana products attracted the second-largest share of inflows last week, netting $15.5 million. However, Ether products experienced outflows of $7.4 million, marking the only instance of outflows among altcoins for the week.

More recently, interest in a spot Bitcoin ETF surged on October 23rd, driven by positive developments regarding BlackRock’s ETF approval prospects and a U.S. Appellate Court mandate directing the Securities and Exchange Commission to review Grayscale’s spot Bitcoin ETF filing.

This news catalyzed a 14% surge in Bitcoin’s price over the past 24 hours, briefly pushing it above $34,000 for the first time since May 2022.

The price increase also resulted in over $193 million in Bitcoin short positions being liquidated within the past 24 hours, according to CoinGlass data.

Dollar Dips Ahead of Key US Data

The US dollar weakened against a basket of currencies on Tuesday, reflecting a decline in Treasury yields as investors anxiously awaited critical US economic data ahead of the Federal Reserve’s upcoming monetary policy meeting.

The dollar index was last seen at around 105.57, having slipped more than 0.5% in the previous session as US Treasury yields declined.

The greenback had found support the previous week when Fed Chair Jerome Powell suggested that the strength of the US economy might justify tighter financial conditions, pushing the benchmark 10-year yield above 5%, its highest level since July 2007.

Bitcoin regained the market’s attention as its value soared on speculation that the United States might soon approve a bitcoin exchange-traded fund (ETF).

Market focus has now shifted to some of the final pieces of US economic data before the Fed’s meeting scheduled for October 31 – November 1. This includes the flash purchasing managers’ index (PMI) set to be released later on Tuesday and the gross domestic product (GDP) data due on Thursday.

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According to Matt Simpson, senior market analyst at City Index, the PMI data could shape market expectations ahead of the GDP report. He stated that “if the data leans far enough one way, it could trigger a robust rally or a breakdown in the dollar, especially since the Fed is in a blackout period” – a period during which restrictions are placed on public communications from central bank officials leading up to the policy meeting.

The Fed is widely anticipated to maintain its interest rates at the meeting next week.

Similarly, the European Central Bank is expected to keep its interest rates unchanged at their meeting on Thursday, after raising key interest rates by 25 basis points in September. The euro remained relatively stable at $1.0665, retaining its gains against the dollar from the previous day.

Amid the dollar’s retreat, the battered Japanese yen experienced some relief. The yen had touched the sensitive 150-level on both Friday and Monday and was last trading flat against the US dollar at 149.77. Traders view the 150 threshold as a possible trigger for Japanese authorities to intervene in the currency market.

However, if strong US data is reported this week, it could push the yen back towards the danger zone. Kyle Rodda, senior financial market analyst at Capital.com, noted that “the yen will be particularly sensitive to strong US data, especially if it pushes Treasury yields past the apparent key resistance level of around 5%.”