Last week, digital asset investment products saw a strong increase with a capital influx of up to 572 million USD, thanks to the growth of Bitcoin and Ethereum along with the news that the United States allows digital assets into 401(k) plans. This wave occurred even as liquidity across the industry decreased during the summer.
The recovery of the digital asset market is mainly driven by the momentum from U.S. investors, particularly after significant policy changes regarding 401(k), despite overall growth slowing down in Europe and Canada.
MAIN CONTENT
Investment capital into digital assets rebounded strongly, reaching 572 million USD in just one week.
The policy allowing digital assets in 401(k) plans in the U.S. is the main driving force, pushing total record inflow to 8.2 billion USD since the beginning of the year.
Bitcoin and Ethereum lead growth, while Altcoins like Solana, XRP, and NEAR also record significant new capital.
How did digital asset investment products recover strongly last week?
Last week, the digital asset investment product market recorded an impressive new capital influx – 572 million USD, prominent amidst overall declining liquidity and reduced summer buying power.
CoinShares analysis shows that after a long period of calm in the middle of the year, capital flows began to return strongly as Bitcoin and Ethereum prices recovered sharply. This volatility occurred immediately after the news that the U.S. approved digital assets in 401(k) plans, creating a psychological boost for institutional investors. This is an indication that macro policies in the U.S. continue to shape the wave of investment in both Bitcoin and the Altcoin market.
How have U.S. policy factors driven the market?
Changes in digital asset policies within 401(k) plans are the decisive motivation, attracting massive capital flows into digital investment products in the U.S. over the past weekend.
Last Thursday, the decision of U.S. regulators officially announced the allowance of digital assets into 401(k) retirement plans, leading to a strong FOMO wave among large and institutional investors. In the following days, inflow was recorded at 1.57 billion USD. This demonstrates the influence of U.S. policy on global investment sentiment, especially in Bitcoin and Ethereum-related ETFs.
"This has pushed the total inflow value from the beginning of the year to a record 8.2 billion USD, while the recovering asset prices have helped total assets under management (AUM) reach a new peak of 32.6 billion USD, an increase of 82% since the beginning of the year."
James Butterfill, Head of Research at CoinShares, Weekly Report July 2024
Where is the growth in capital coming from? A reality comparison between the U.S., Canada, and Europe
The U.S. is the main driver, leading capital flows into digital assets, while Canada and Europe show cautious growth or slight declines.
According to CoinShares, the U.S. dominates with an inflow of 608 million USD just last week – compared to Canada which only achieved 16.5 million USD. Meanwhile, European markets such as Germany, Sweden, and Switzerland saw total outflows of 54.3 million USD. This difference somewhat reflects the level of regulatory openness and the desire for innovation among Northern U.S. investors compared to the cautious environment in European financial centers.
"The new policy in the United States not only affects the domestic market but also creates a spillover effect on global capital flows, while major European markets continue to adopt a defensive trend."
CoinShares Weekly Report, July 2024
Inflow/Outflow region (million USD) Key features United States +608 Leading globally, benefiting from 401(k) policy Canada +16.5 Slight growth, waiting sentiment Germany, Sweden, Switzerland -54.3 Capital withdrawal, defensive investment, lower than expectations
What factors contributed to the breakthrough of Bitcoin and Ethereum?
The sharp increases in Bitcoin and Ethereum prices are important catalysts for capital flows returning to digital asset products.
The increase in Bitcoin and Ethereum prices has directly boosted market sentiment, helping attract money from ETP and ETF funds back into the market. Ethereum is particularly noteworthy as it reached the 4,000 USD mark – the first time since December 2024, emphasizing its appeal to institutional investors. According to Butterfill, this price increase has driven ETP products based on Ethereum to attract nearly 270 million USD in inflow last week.
"Ethereum has maintained a growth trend since July with inflow reaching 270 million USD, leading in institutional attraction."
CoinShares Report, Week 7/2024
Is capital flow focused on Bitcoin, Ethereum, or do Altcoins also benefit?
Bitcoin and Ethereum products account for a major share, but Altcoins like Solana, XRP, and NEAR also see significant interest from institutional investors.
In addition to the leading ETFs and ETPs on Bitcoin and Ethereum, major Altcoins also saw a return of capital inflow. Data shows Solana received 21.8 million USD, XRP added 18.4 million USD, and NEAR reached 10.1 million USD just last week. This highlights the investor's portfolio diversification and expectations for the Layer 1 ecosystem, as well as cross-border payment solutions remaining robust despite market liquidity declining.
Who are the big winners among investment product issuers and who is under pressure to withdraw capital?
ProShares ETF led the capital influx products in the U.S. last week with 35 million USD; meanwhile, CoinShares XBT Provider AB recorded significant outflows, raising total outflows since the beginning of the year to 414 million USD.
Smaller issuers, categorized under "Other," made their mark by attracting 151 million USD, indicating the appeal of flexible, innovative fund products outside traditional fund managers. The capital allocation shows that investors are not only prioritizing well-known products but are also actively seeking differentiated strategies to adapt to the market.
"The trend of seeking diverse, flexible products outside traditional issuance is a highlight amid market volatility."
CoinShares Report, 2024
The market continues to grow despite declining liquidity: What is the true significance?
Despite ETP trading volume decreasing by 23% compared to last month, capital flows increased significantly – reflecting long-term confidence and institutional money actively seeking opportunities.
This divergence suggests that declining liquidity does not equate to the risk of capital loss, but rather indicates a shift in buying power towards medium- to long-term investment products, focused on major catalysts like policy changes. Institutional investment is refocusing on digital assets when valuations are attractive and new policies expand benefits, even in the face of profit-taking and local outflows in some areas.
Will this growth be sustainable? Forecasting capital flows in the coming months
The current strong recovery helps the digital asset market establish a new upward trend, but the long-term outlook still depends on policy developments and price fluctuations of leading cryptocurrencies.
If the U.S. continues to maintain an open policy for digital assets in traditional investment channels, especially in 401(k) plans, the potential for inflow remains high. However, factors such as the U.S. Central Bank's interest rate policy, global liquidity, and the trends of Bitcoin and Ethereum are still variables to closely monitor. History shows that every strong growth period comes with significant corrections.
"The current allure of digital asset investments has a solid foundation, especially thanks to the role of institutional investors, but there is still a need for greater stability in legal standards and market support mechanisms."
KPMG Research Report, 2024
Comparing investment products, capital flows, and impacts on major digital asset segments
The most notable impacts of capital flows are seen in Bitcoin and Ethereum, but Altcoin funds also play a role in attracting investors looking to diversify risks and seize new technological trends.
Bitcoin ETF and ETP products continue to maintain strong appeal due to their safe positioning in the digital asset market. Ethereum products stand out as they benefit from expectations surrounding Layer 2 technology and DeFi growth, while Altcoins become a destination for capital seeking high returns – especially emerging Layer 1 ecosystems.
Capital flow segment last week (million USD) Key features Bitcoin Not reported separately Leading the market, benefiting from major policies Ethereum 270 Outstanding growth for ETFs, ETPs Solana 21.8 Layer 1 prospects, attracting young investors XRP 18.4 Benefiting from cross-border payment trends NEAR 10.1 New growth in the Layer 1 ecosystem
What should investors pay attention to in the context of fluctuating capital flows?
Currently, capital flows are actively focused on products with strong risk management solutions, high growth potential, and transparent legal foundations.
Experts recommend that both individual and institutional investors diversify their portfolios and closely monitor policy fluctuations, especially in the U.S. and EU. The capital flow differentiation between Northern U.S. and Europe suggests that risks and potentials should be reassessed based on individual market conditions.
Forecast of digital asset capital flow trends in the second half of 2024
With the current record inflow and open 401(k) policy, the digital asset market may continue to grow in the short term, but technical corrections or local outflows in some regions cannot be ruled out.
Reports from CoinShares and major research institutions like KPMG and Deloitte indicate that while overall industry liquidity is low, capital flows remain stable, which is a positive sign, but investors need to closely monitor any policy and price fluctuations of leading cryptocurrencies such as Bitcoin, Ethereum, and Solana in the coming months.
Frequently Asked Questions
What factors contributed to the strongest increase in digital asset capital flows?
The main increase is due to the policy allowing digital assets into 401(k) plans in the United States, combined with the recovery of Bitcoin and Ethereum prices and strong participation from institutional investors.
Is the U.S. or Europe the main driver of capital influx last week?
The U.S. plays a leading role in global capital flows with 608 million USD, while Europe recorded slight outflows, reflecting a clear differentiation between the two regions.
Is Ethereum really more prominent than Bitcoin?
Ethereum leads in ETP and ETF inflow rates with 270 million USD last week, highlighting its appeal to institutional investors, but both are important to the market.
Which Altcoin is receiving significant attention?
Solana, XRP, and NEAR are three standout Altcoins with inflows of 21.8 million, 18.4 million, and 10.1 million USD respectively last week, indicating high expectations for Layer 1 and cross-border payments.
What are the main risks with the current capital flow?
U.S. interest rate volatility, policy changes, and the prices of major cryptocurrencies are major risks; investors should be cautious and closely monitor policy updates from the U.S. and EU.
What does it mean when trading volume decreases but inflows still increase?
This indicates that medium and long-term confidence is returning, even though short-term liquidity has not recovered, emphasizing the role of institutional money leading the market.
What is the current total assets under management in this field?
The CoinShares report shows that total assets under management (AUM) reached a peak of 32.6 billion USD, an increase of 82% from the beginning of the year.
Source: https://tintucbitcoin.com/bitcoin-ethereum-tang-sau-chap-thuan-401k/
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