Bitcoin ETFs Add $250 Million in Surge Ahead of Expected Rate Cut

Bitcoin exchange-traded funds (ETFs) are seeing a fresh surge of interest.

Figures shared by blockchain data firm Arkham Intelligence show that the American funds collectively added approximately $250 million worth of Bitcoin on Monday, the most added in a single day for more than a month.

Following the jump, the price of Bitcoin itself touched over $61,000 per coin on Tuesday for the first time in September.

Why the sudden spike of demand? 

First, the basics: ETFs are simply funds that hold an asset—in this case, Bitcoin—and allow investors to get exposure to it via shares that trade on a traditional stock exchange. 

When the new funds receive Bitcoin, it is due to investor demand: People or entities are buying shares which track the underlying price of the asset, and the operators of the funds that hold the crypto then make the buys on behalf of the investors.

Top asset managers such as BlackRock, Fidelity, and Grayscale launched the products in January after getting approval from the U.S. Securities and Exchange Commission (SEC). 

And they were wildly popular over the first few months, with billions of dollars in investor cash hitting the products. But demand slowed in recent months, thanks in part to worries over when the Federal Reserve would slash interest rates—and by how much.

Markets are expecting America’s central bank to cut rates tomorrow—but it has yet to be revealed how much borrowing costs will be lowered. 

Some analysts have said that a large 50-basis point cut could come than a smaller, 25-basis point one—leading some investors to up their risk appetite, experts told Decrypt. 

“I think this is in direct response to the increasing likelihood of a 50-basis point rate cut rather than a 25-basis point cut,” CoinShares Head of Research James Butterfill said. 

“We saw the inflows really pick up on Friday last week," he added, "when comments were made by various Fed members alluding to the 50bp cut and expressing a much more dovish tone.” 

Investors snapping up shares of the new Bitcoin ETFs earlier this year led to a price boom, with the biggest virtual coin hitting a fresh all-time high of $73,737 in March. The asset has seen volatility since then, and remains about 18% down from that peak.

However, the tide appears to be turning: CoinShares data released Monday showed that $436 million hit crypto investment funds last week, and most of that went to Bitcoin ETFs. That came after a streak in which investors cashed out a huge $1.2 billion from Bitcoin funds.

Will tomorrow’s expected announcement give Bitcoin another nudge up the price chart?

Edited by Andrew Hayward