Crypto exchange-traded products (ETPs) experienced a surge in inflows, reaching their highest level in over a year, according to a report from CoinShares. Inflows for the week ending October 27 were recorded at $326 million, significantly higher than the $66 million from the previous week.
ETPs are investment funds that track the price of a specific asset. In the case of crypto ETPs, they track the prices of major cryptocurrencies like Bitcoin (BTC) and Ether (ETH). Many investors prefer to gain exposure to crypto prices through these funds rather than directly holding the assets themselves, as shares of these funds can be held in a traditional brokerage account.
An “inflow” occurs when the price of an ETP rises faster than its underlying asset, leading the fund to buy more of the asset. This is generally seen as a bullish indicator for the underlying asset. On the other hand, an “outflow” occurs when the fund has to sell the asset due to declining prices of its shares or notes relative to its target, which is typically viewed as bearish.
The $326 million inflow for the week ending October 27 was the highest since July 2022, marking a significant milestone after 15 months. It also represented the fifth consecutive week of inflows for ETPs.
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CoinShares suggests that rising investor optimism surrounding the potential approval of a spot-based Bitcoin exchange-traded fund (ETF) by the U.S. Securities and Exchange Commission (SEC) could be a contributing factor to the surge in inflows. It is anticipated that once approved, U.S.-based funds will experience significant inflows.
However, despite the substantial increase in inflows, CoinShares notes that it is only the 21st largest increase ever recorded. The majority of the inflows went into Bitcoin ETPs, accounting for 90% of the total. Solana (SOL) also received a boost, with inflows of $24 million. In contrast, Ether funds experienced outflows of $6 million.
It is worth noting that the SEC has yet to approve a spot Bitcoin ETF, despite multiple applications being filed over the years. VanEck recently amended its application in October to address the concerns raised by the SEC. Additionally, Hashdex met with the SEC in an attempt to gain approval for its spot Bitcoin ETP.
In conclusion, the surge in inflows for crypto ETPs indicates growing investor optimism, potentially linked to the anticipation of a spot Bitcoin ETF approval by the SEC. While this increase in inflows is significant, it falls short of being the largest on record. Bitcoin ETPs garnered the majority of inflows, while other cryptocurrencies like Solana saw positive inflows as well. However, Ether funds experienced outflows. The approval of a spot Bitcoin ETF by the SEC remains eagerly awaited by industry participants.
