Cryptos Slip Ahead Of Major Monetary Policy Cues

Crypto market sentiment remains muted as markets wait for key monetary policy triggers including the release of the FOMC minutes on Wednesday and the economic policy symposium at Jackson Hole later in the week.

The Federal Open Markets Committee had on July 31 held interest rates steady, noting that inflation remained somewhat elevated despite making some progress in recent months toward the Committee’s 2 percent inflation objective. Though markets overwhelmingly expect the Fed to cut interest rates in September, anxiety lingers on whether deliberations at the July FOMC pointed to such a distinct possibility in the next meeting.

Also, the massive turbulence in global markets in the week following the FOMC renewed calls for a rate cut that would save the U.S. economy from a recessionary freefall. Though economic data released subsequently obviated concerns of a hard landing for the U.S. economy, markets are keenly waiting for Fed Chair Jerome Powell’s take on the interest rate trajectory.

The renewed recession fears and the overwhelming rate cut expectations have turned the market spotlight on the Jackson Hole symposium scheduled for later in the week. The subject of the current year’s Economic Policy Symposium to be held between August 22 and 24 is “Reassessing the Effectiveness and Transmission of Monetary Policy”. At its annual economic policy symposium in Jackson Hole, Wyoming, the Federal Reserve Bank of Kansas City hosts dozens of central bankers, policymakers, academics and economists from around the world.

Monetary policy assumes significance as market interest rates are a direct consequence of the same. Though cryptocurrencies are not interest bearing, any change in general interest rates increases or decreases the opportunity cost of holding cryptocurrencies. Hence interest rate policy is an important concern for crypto markets worldwide.

The Federal Reserve controls three tools of monetary policy viz open market operations, the discount rate, and reserve requirements through which it influences the demand for, and supply of, balances that depository institutions hold at Federal Reserve Banks. In this way it alters the federal funds rate which is the interest rate at which depository institutions lend balances at the Federal Reserve to other depository institutions overnight. Changes in the federal funds rate trigger a chain of events that affect other short-term interest rates, foreign exchange rates, long-term interest rates, the amount of money and credit, and, ultimately, a range of economic variables, including employment, output, and prices of goods and services.

Amidst the lingering anxiety about the monetary policy outlook, overall crypto market capitalization has decreased to $2.06 trillion from $2.11 trillion a day earlier.

Bitcoin slipped 2.3 percent overnight to trade at $58,488.86, around 21 percent below the all-time high. BTC has edged down 0.3 percent in the past week while holding on to gains of more than 38 percent in 2024. The original cryptocurrency traded between $59,975.08 and $57,864.71 in the past 24 hours.

Ethereum slipped 3.2 percent in the past 24 hours to trade at $2,579.91, around 47 percent below the previous peak. Weekly losses exceed 2.3 percent whereas gains in 2024 have decreased to a little over 13 percent. Ether traded between $2,677.46 and $2,566.40 in the past 24 hours.

4th ranked BNB (BNB) edged up 0.34 percent overnight to trade at $538.45. 5th ranked Solana (SOL) shed 1.6 percent overnight to trade at $142.71. 7th ranked XRP (XRP) and 8th ranked Toncoin (TON), both rallied more than 1 percent overnight. 9th ranked Dogecoin (DOGE) erased more than 3.5 percent in the past 24 hours. 10th ranked TRON (TRX) gained more than 3 percent in the past 24 hours to trade at $0.1376.
97th ranked Klaytn (KLAY) topped overnight gains with a surge of 3.9 percent. 10th ranked TRON (TRX) and 27th ranked Monero (XMR) also followed with overnight gains of more than 3 percent.

62nd ranked Celestia (TIA), 67th ranked Ondo (ONDO) and 73rd ranked Brett (BRETT) slipped more than 6 percent in the past 24 hours.

Meanwhile, the past week witnessed nominal inflows to digital asset investment products. The CoinShares’ Digital Asset Fund Flows Weekly report showed inflows of $30 million during the week ended August 17 as compared with $176 million in the previous week. Year-to-date flows stood at $22.2 billion whereas cumulative AUM aggregated to $83.8 billion.

Bitcoin-based products topped with inflows of $42 million. Multi-asset products received inflows of $21 million, followed by Ethereum-based products that recorded inflows of $4.2 million.

Solana-based products recorded massive outflows of $38.9 million, dragging year-to-date flows to $31 million. Short-Bitcoin products also recorded outflows of $0.9 million.

More than 79 percent of the cumulative AUM of $83.8 billion is attributed to Bitcoin products that account for an AUM of $66.6 billion. Bitcoin’s dominance of crypto market is much lower, at around 56 percent. AUM of Ethereum products stood at $10.8 billion. Multi-asset portfolios command assets under management of $4.1 billion. An AUM of $1.1 billion is attributed to Solana-based products and $517 million to Binance-based products.

The provider-wise analysis of flows inter alia shows inflows of $147 million to iShares ETF followed by $82 million to Fidelity ETF and $36 million to Ark 21 Shares ETF. Bitwise ETF also recorded inflows of $12 million.

Outflows of $311 million were recorded from Grayscale Investments followed by $48 million from 21Shares.

iShares ETF tops with a cumulative AUM of $21.7 billion implying a share of 25.9 percent. Though year-to-date outflows exceed $18.7 billion, Grayscale Investments still accounts for an AUM of $20.5 billion, which is 24.5 percent of the cumulative AUM of $83.8 billion. Fidelity commands an AUM of $10.6 billion, followed by 21Shares that has mobilized assets under management to the tune of $2.9 billion. The top 3 viz iShares, Grayscale Investments and Fidelity account for more than 63 percent of the total AUM.

The country-wise analysis shows weekly inflows of $62 million to United States. Canada recorded inflows of more than $9 million followed by Brazil with inflows exceeding $7 million.

Switzerland recorded outflows of close to $30 million followed by Hong Kong that recorded outflows of more than $14 million. Germany also recorded outflows of more than $6 million.

Of the cumulative AUM of $83.8 billion, $63.5 billion or 75.8 percent is in United States. Switzerland follows with AUM of more than $4.4 billion whereas Canada accounts for an AUM of $4.2 billion. Germany accounts for an AUM of $3.5 billion followed by Sweden with an AUM of $2.7 billion.

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