Crypto exchange-traded products (ETPs) experienced their highest weekly inflows in over a year, reaching $326 million for the week ending October 27, according to a report by CoinShares. This surge in inflows was a significant increase compared to the previous week’s $66 million inflows.
ETPs are investment funds that are designed to track the price of a specific asset. In the world of crypto, ETPs typically follow the price movements of popular cryptocurrencies like Bitcoin (BTC) and Ether (ETH). Some investors prefer investing in ETPs rather than directly holding the underlying assets, as ETP shares can be held in traditional brokerage accounts.
When an ETP experiences an “inflow,” it means that the fund’s price is rising at a faster rate than the price of the underlying asset. This prompts the fund to purchase more of the asset, indicating bullish sentiment. On the other hand, an “outflow” occurs when the fund must sell the asset due to declining prices of the ETP shares relative to their target, suggesting bearish sentiment.
CoinShares’ report revealed that the $326 million inflows for the week ending October 27 were the highest since July 2022, marking a 15-month record. Additionally, this marked the fifth consecutive week of ETP inflows, indicating continued investor interest and confidence in crypto.
One possible explanation for the sudden rise in inflows, as suggested by CoinShares, is the growing optimism among investors about the potential approval of a spot-based Bitcoin exchange-traded fund (ETF) by the U.S. Securities and Exchange Commission (SEC). If approved, it is anticipated that there will be a significant influx of funds into U.S.-based ETPs.
Despite the substantial increase in inflows, CoinShares noted that this week’s inflow ranked only as the 21st largest on record. The majority of the inflows were directed towards Bitcoin ETPs, accounting for 90% of the total. Solana (SOL), another popular cryptocurrency, also benefited from market optimism, attracting $24 million in inflows. However, Ether funds experienced outflows amounting to $6 million.
It is worth noting that the SEC has yet to approve a spot Bitcoin ETP, despite numerous applications being submitted over the years. Van Eck recently amended its application on October 19, presumably to address the agency’s concerns. Hashdex also met with the SEC on October 25 in an effort to gain approval for its spot Bitcoin ETP.
In conclusion, the crypto market witnessed a significant increase in inflows for ETPs, reaching their highest levels in over a year. Investors’ growing optimism about a potential spot Bitcoin ETF approval by the SEC may have contributed to this surge in inflows. However, it remains to be seen whether the SEC will grant approval for a spot Bitcoin ETP in the near future.