Digital Assets Raise $2.2B with US Election Hype

The past week has seen a significant increase in the price of digital assets products to $2.2 billion, with a growing sense of optimism towards the US election.

Digital asset products have attracted $2.2 billion in net inflows globally, the highest increase since July. The data provided by CoinShares emphasizes a significant reversal of the previous trend of outflows. This increase is due to the increasing optimism of investors regarding the forthcoming elections in the United States.

Market participants anticipate that the political environment may generate favorable opportunities for digital assets. This may result in increased participation from institutional and retail investors. The majority of the inflows, as reported by James Butterfill, Head of Research at CoinShares, were from investment funds in the United States. This indicates a growing optimism that a Republican-led government may favor cryptocurrency regulations.

Asset funds from the United States dominate the surge

Inflows of $2.3 billion were observed in the United States. The crypto investment products of Canada, Sweden, and Switzerland also performed well, with inflows of $20 million, $18 million, and $15 million, respectively. At the same time, the Bitcoin Spot ETF experienced one of the most significant weekly inflows, totaling $2.13 billion, due to the surge in BTC prices. The most considerable inflow of short Bitcoin since March was also recorded, with a total of $12 million.

In addition, Ethereum, Solana, Litecoin, and XRP respectively experienced inflows of $58M, $2.4M, $1.7M, and $0.7M. Nevertheless, the 17-week streak of consecutive inflows in multi-asset products was abruptly terminated by $5.3 million in outflows.

The influx of capital has significantly impacted the industry. Trading volumes in digital asset investment products have increased by 30%. This surge in trading activity underscores an increasing desire for exposure to cryptocurrencies and other blockchain-based assets. Similarly, the aggregate Assets Under Management (AUM) of digital asset funds have approached $100 billion due to the capital inflows.

Investors will closely monitor the intersection of politics and digital finance as the US elections approach.

Cryptocurrency Recovers from Market Crash

The total AUM of crypto investment products decreased to $75 billion in the past. This dip effectively eliminated more than $20 billion from the correction. Nevertheless, it rebounded in August, reaching $85 billion. The sales of exchange-traded products (ETPs) significantly influenced the recovery and the vast figures.

In the same month, crypto investment products experienced approximately $176 million in inflows. At that time, the crypto market crash was a critical event for numerous investors, who capitalized on the opportunity to diversify their funds. In September, the global crypto investment market saw $321 million in net inflows across various digital asset products.

Two weeks of outflows preceded the rebound. The surge was facilitated by the contributions of asset management giants BlackRock, Fidelity, Bitwise, and Grayscale Investments. The Federal Open Market Committee (FOMC)’s recent interest rate reductions also contributed to the recovery.

The report indicates that the FOMC’s decision to reduce interest rates by 50 basis points positively impacted market sentiment. Additionally, it is anticipated that a 25 basis point rate reduction will be implemented in November. This trend has fostered a more favorable environment for investors and facilitated capital flow into crypto products.