Crypto ETFs Witness $950 Million Inflow as Anticipation Builds Around Fed Rate Decisions

Over the past week, cryptocurrency exchange-traded funds (ETFs) witnessed an influx of approximately $990 million, signaling one of the most significant performances since the halfway mark of this year. This surge in inflows ahead of a highly anticipated Federal Reserve interest rate decision underscores the growing investor confidence in the digital asset sector.

Massive Inflows Into Crypto ETFs as Confidence Returns

A recent analysis from CoinShares reveals that digital asset investment vehicles experienced inflows of $935 million following several volatile trading sessions. This robust performance sets the stage for a pivotal economic event—the anticipated Federal Open Market Committee (FOMC) meeting.

Investors remain optimistic, buoyed by inflation figures that fell short of expectations. Many anticipate that the Federal Reserve will execute further interest rate reductions before the year’s close. Such sentiment has kept crypto ETF trading volumes brisk, with data reflecting a weekly turnover of $40 billion, significantly surpassing the year-to-date average of $29.5 billion.

Region-based insights show the United States leading this inflow with $855 million, while Germany reported inflows of $490 million, marking one of its most remarkable weeks on record. Conversely, Switzerland experienced outflows totaling $347 million. Analysts suggest these movements are largely attributed to internal fund reallocations rather than active selling.

Bitcoin emerged as the dominant force driving inflows into crypto ETFs. It accounted for $945 million in investments over the week, bringing the cumulative inflows since the Fed commenced its recent rate-cutting cycle to $9.6 billion. However, Ethereum encountered its first outflows in five weeks, with $173 million being withdrawn from the asset class.

Meanwhile, digital currencies like Solana and XRP recorded moderate inflows, with figures of $30.5 million and $82.7 million, respectively. This activity coincides with investors eagerly awaiting updates on pending ETF applications in the U.S.

Expected Fed Rate Cut to Shape Market Outlook

All attention is now directed toward the upcoming Federal Reserve’s FOMC meeting scheduled for later this week. According to a Reuters report, it is expected that policymakers will reduce interest rates by 23 basis points.

This anticipated adjustment comes in the wake of the year’s first interest rate reduction, where the federal funds rate was lowered by 25 basis points, adjusting the target range from 4.3%–4.6% to 4.05%–4.3%.

Several indicators suggest the possibility of a Fed rate cut. For instance, recent U.S. Consumer Price Index (CPI) data showed a year-on-year increase of 3.1% through September, slightly below forecasts. Furthermore, a rise in unemployment insurance claims hints at a gradual deceleration in hiring trends.

If the Fed proceeds with a quarter-point rate cut on Wednesday, this would place the policy rate between 3.8% and 4.05%. Market activities, evidenced by data from Polymarket, show that 97% of traders are wagering on a 23bp cut in the FOMC meeting.

Fed Vice Chair Michelle Bowman has indicated that the term “additional adjustments” used by the committee suggests readiness to act if economic conditions necessitate. Still, caution prevails among some policymakers. For instance, Fed Official Lorie Logan warned that a premature cut could reignite inflationary pressures, as current inflation remains above the targeted 2%.

The financial community awaits the Fed’s decision, with the potential rate cut anticipated to substantially influence market dynamics. This event follows a series of economic adjustments aimed at spurring growth and stabilizing the financial environment amid global uncertainties.