Bitcoin Attracts Investors as Bulls Predict Lowest Point Reached

According to the most recent weekly fund flows report published by crypto intelligence company CoinShares, investment products related to digital assets experienced the highest level of new capital since July 2022. Bitcoin was the most popular cryptocurrency and accounted for the majority of the inflows of capital into the cryptocurrency investment product area, which totalled $116 million.

Additionally, $4.4 million was invested in short Bitcoin goods, bringing the total amount of monthly investment in short Bitcoin products to $30 million. However, this is still a far cry from the month-to-date inflow into long Bitcoin products, which stood at $125 million at its most recent valuation.

According to CoinShares, the total assets under management have increased to $28 billion, marking an increase of 43% from the post-FTX collapse lows seen in November 2022. This increase is primarily attributable to the price rise of cryptocurrency assets.

According to the study published by the cryptocurrency intelligence company, trading volumes are also beginning to rebound. During the course of the past week, goods to the value of $1.3 billion changed hands, which is 17% higher than the average for the year to this point. According to CoinShares’ research, this still accounts for only roughly 1.4% of the trade volumes witnessed across reputable cryptocurrency exchanges.

According to Coinshares, investors continued to favor “select investments,” and the company pointed to the fact that multi-asset investment products witnessed outflows for a ninth straight week. Outflows from multi-asset funds totaled $16 million through the first two weeks of the month, following a weekly outflow of $6.4 million.

Upcoming Macro Risks to Test the “Bitcoin Has Bottomed” Thesis

According to the most recent study published by CoinShares, institutional investors, who often prefer to own crypto investment products rather than the underlying spot commodity, are finally beginning to get engaged in the rally that has seen Bitcoin’s price jump by forty percent this month. Before the recent uptick in the purchase of Bitcoin investment products, the monthly inflows were just a negligible $9 million.

This change in attitude is reflective of a rising narrative among crypto investors, traders, analysts, and commentators that the bear market that has dominated 2022 may now have come to an end. This week, that narrative will be put to the ultimate test as a number of significant upcoming macro events, such as a meeting of the Federal Reserve on Wednesday, the release of the US jobs report on Friday, and the results of the most recent ISM PMI survey, all have the potential to spark volatility.

It is anticipated that the economic statistics released this week in the United States will corroborate trends that are currently occurring in the US economy. These trends include the fact that the economy is grinding to a halt, although hiring and the labor market remain healthy enough for the time being. The meeting of the Federal Reserve on Wednesday will be the actual unpredictability factor.

As a result of the widespread expectation that the Federal Reserve will raise interest rates by 25 basis points on Wednesday, financial conditions have become more favorable this month (US stocks have risen while US yields and the dollar have fallen). This is due to the belief that the Fed will not tighten monetary policy significantly further. As a matter of fact, as a result of recent shocks to the downside regarding US inflation statistics, the market’s base case is now that there will now only be two more rate hikes of 25 bps from the Fed (including the boost that took place on Wednesday).

However, this goes against the message that many Fed officials have been sending out over the past few weeks. Some of these officials are still talking about interest rates going over 5%, whereas the markets anticipate that they will peak just below 5%. Therefore, the message that Federal Reserve Chair Jerome Powell delivered during the post-meeting press conference will be carefully examined.

If Powell’s comments cause a shift in Fed rate rise expectations toward pricing in a different rate hike in 2022, this might result in a significant decline in risk assets such as Bitcoin. In the near future, Bitcoin could have a pullback that causes it to test both its 21-Day Moving Average and the $21,600 support level. A violation of this level would provide the conditions for a move closer to $20,000 in price.

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