Crypto Inflows Hit a New Record, But Markets Want Reassurance from the Federal Reserve

If Jerome Powell downplays the rising yield, which continues to worry the market, it could send the markets down, sending Bitcoin lower too, despite the influx of both institutions and retail, at least in the short term.


Inflows into cryptocurrency funds and products hit a new record of $4.2 billion for the first quarter, as per CoinShares data, which reflects growing institutional interest.

In the fourth quarter of last year, the record high for crypto inflows was $3.9 billion, putting the total inflows for 2020 to $6.7 billion.

Bitcoin BTC -3.65% Bitcoin / USD BTCUSD $ 49,017.60
-$1,789.14-3.65%
Volume 53.7 b Change -$1,789.14 Open $49,017.60 Circulating 18.71 m Market Cap 917.15 b
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obviously has had the most inflows so far this year with $3.3 billion, followed by Ethereum ETH -3.84% Ethereum / USD ETHUSD $ 3,892.59
-$149.48-3.84%
Volume 42.42 b Change -$149.48 Open $3,892.59 Circulating 115.88 m Market Cap 451.09 b
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at $731 million, the asset manager’s data shows.

Crypto assets under management have also soared to a peak of $55.8 billion, up from $37.6 billion last year.

Grayscale, the world’s largest digital asset manager, has $43.73 billion in assets. CoinShares, the second biggest, along with the other five digital asset managers, are overseeing $5 billion in assets.

Meanwhile, passive funds have an AUM of $54.1 billion, compared with $786 million for those with active strategies.

Just this week, billionaire value investor Howard Marks shared his changed views on Bitcoin, which were “very dismissive” in 2017 due to lack of intrinsic value in the crypto asset. But now, he noted how, unlike the US dollar, Bitcoin by design is limited.

“With the entire world looking for a store of value to replace bonds, gold, stocks, ETFs, real estate, & cash, it is inevitable that more & more successful investors like Howard Marks are going to discover, research, & embrace Bitcoin,” commented BTC bull Michael Saylor, CEO of MicroStrategy.

Beware of Fed Chair

As for the retail participants, as we reported, they are outpacing the institutions this quarter, unlike the Q4 of 2020.

On-chain data also reveals that the number of new users on the blockchain is currently 35,000 per day. This could mean “exchanges are adopting an additional ~100,000 users per day right now,” stated on-chain analyst Willy Woo.

Bitcoin: Entities Net Growth vs Bitcoin Price

Source: Glassnode

Amidst all this, the BTC price continues to feel some weakness this week after hitting a new ATH at just about $62,000 this past weekend before falling to $53,300 on Monday on the back of the recycled FUD of India banning crypto despite the finance minister of the country refuting any such claims.

“As bitcoin moves into the mainstream and captures greater attention, it will likely draw further scrutiny from regulators in the United States and Asia,” said Jesse Cohen, senior analyst at Investing.com. “The potential for more scrutiny and tighter regulation remains the biggest headwind for bitcoin.”

In the short-term, the billions of stimulus checks that hit big banks on Wednesday are bullish signs.

As of writing, we are trading just below $55k ahead of the conclusion of the two-day policy meeting of the FOMC on Wednesday.

While Federal Reserve Chair Jerome Powell has promised to maintain aggressive support of the U.S. economy, if he doesn’t, the markets could tank pretty badly, and Bitcoin, whose correlation with the stock market has been high since February, will fall in tandem, taking the entire crypto market down with it.

“The market wants the SLR extended and reassurances regarding yields. If the SLR doesn't get extended and Powell plays rising yields down, turmoil in rates would ensue, pushing other markets down,” said trader and economist Alex Kruger.

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