Tag: Inflows

Investors Flock to US Money Market Funds Amid Banking Crisis

by Blockchain News

As the global banking crisis continues to fuel concerns among investors, the popularity of US money market funds is surging. According to Emerging Portfolio Fund Research (EPFR) data obtained by the Financial Times, more than $286 billion has been invested in these funds so far in March. The inflows are the highest seen in a month since the emergence of the Covid-19 pandemic.

The top beneficiaries of this trend are Goldman Sachs, JPMorgan Chase, and Fidelity. The figures show that Goldman Sachs’ money funds have grown by 13%, receiving $52 billion in investment. JPMorgan’s funds have seen inflows of nearly $46 billion, while Fidelity has enjoyed nearly $37 billion in investment. These funds are offering their best yields in years, as the US Federal Reserve continues to raise interest rates in a bid to curb inflation.

Money market funds are a popular choice for investors during uncertain times because they offer high liquidity and low risk. The current crisis in the banking sector has only served to amplify these qualities. The fear of liquidity constraints and potential bank failures has caused many investors to seek out safer investments, and US money market funds are delivering the kind of stability that investors crave.

In the seven days leading up to March 22, total money market fund assets increased by $117.42 billion to $5.13 trillion, according to a report from the Investment Company Institute. Government funds increased by $131.84 billion, while prime funds decreased by $10.83 billion. Tax-exempt money market funds shrank by $3.61 billion.

The influx of cash into money market funds is driven by fears surrounding the health of the financial system. Banks in the US and Europe are facing liquidity constraints as monetary policy tightens, and investors are wary of the potential risks associated with these developments.

For example, on March 24, shares of Deutsche Bank dropped due to an increase in the cost of insuring against its potential default risk. The bank’s five-year credit default swaps (CDS) climbed 19 basis points from the previous day, closing at 222 bps, according to Reuters, citing S&P Global Market Intelligence data. Meanwhile, in the US, there is still uncertainty surrounding regional banks, as insurance on default for financial services firms Charles Schwab and Capital One soared last week. The latest data shows that credit default swaps jumped over 80% to 103 bps as of March 20.

The surge in popularity of money market funds underscores the ongoing concerns of investors in the face of a global banking crisis. With interest rates continuing to rise, and fears of liquidity constraints and bank failures mounting, it seems likely that this trend will continue in the months ahead.

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Bitcoin Inflows Suggest Institutional Investors Are Moving Back Into The Market

by NEWSBTC

Bitcoin and the crypto market at large had suffered outflows that coincided with the massive sell-offs that rocked the market. This contributed to the downtrend that saw bitcoin touch towards six-month lows while investors who had gotten into the market later suffered massive losses. This outflow trend is beginning to reverse so as bitcoin and other digital assets begin to record inflows after a long drought.

Bitcoin Inflows Back Up

The past week for bitcoin has been an encouraging one. The digital asset is nowhere near its previous highs but had managed to recover from its recent lows. It had run up to $38,000 once again, reinstating some level of faith back in the market. On the institutional investors’ side, this trend, albeit a bit slower, is the same as investors begin to gradually move back into the cryptocurrency.

Related Reading | Bitcoin Funding Rates Remain Negative For More Than A Week

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In the latest CoinShares report, we see that bitcoin has begun to record market inflows once more. This is a deviation from the end of 2021 and the beginning of 2022 where outflows reached record highs. Greatly impacted by the minutes released by the Fed, bitcoin alone had recorded outflows to the tune of $107 million in a single week, setting a new record.

Bitcoin price chart from TradingView.com

BTC recovers from market crash | Source: BTCUSD on TradingView.com

However, in the past two weeks, the tide is turning towards inflows as CoinShares reported the first week of inflows after massive outflows. This past week continues to mirror this trend as inflows have continued.

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Inflows to bitcoin were reported to total $22 million for last week. A small number compared to what had become the norm by the third quarter of 2021, but a reassuring figure nonetheless. It’s a step up from last week when BTC’s total AuM crashed to a six-month low of $29 billion.

Altcoins Continue To Suffer

Altcoins have not mirrored this movement of bitcoin this time around. Instead, altcoins continue to bear the brunt of the market onslaught as outflows continue to be the order of the day.

Leading altcoin Ethereum has now marked its 8th consecutive week of inflows. In this time period, the altcoin has seen a total of $272 million flow out of the week, marking some of the highest negative sentiment towards the digital asset.

Related Reading | The Uber Rich Investors Are Picking This Altcoin Over Bitcoin

Other altcoins like Cardano, Solana, and Polkadot, which are fast-becoming investor favorites, did not fare well for the week either. All of these digital assets saw another week of outflows.

Multi-asset funds and Blockchain equity investment products deviated from the performance of altcoins. Following in the footsteps of bitcoin, each of them recorded inflows for the week, $32 million for multi-asset funds, and $15 million for Blockchain equity investment products.

Featured image from Bitcoin News, chart from TradingView.com

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Bitcoin price dips below $60K — But here’s why a bigger rally may be brewing

by Cointelegraph

Bitcoin (BTC) pared some gains, dipping below $60,000 on March 14, a day after setting a new all-time high of $61,950 on Binance. However, on-chain data indicates that the uptrend is likely to continue in the near term.

One key metric that is signaling an optimistic short-term trend for Bitcoin is the rise in stablecoin deposits into exchanges.

Although high funding rates and an overcrowded market are causing the price to pull back, the entrance of sidelined capital into the crypto market may further boost Bitcoin’s momentum.

Why Bitcoin dropped after $60K breach

When Bitcoin enters price discovery and hits a new record-high, the interest in the market naturally spikes.

There is a lot of liquidity in the current red-hot market, making it an ideal period for whales and high-net-worth investors to take profit on their positions.

Bitcoin funding rates. Source: Bybt.com

Filbfilb, a pseudonymous trader and technical analyst, noted that high futures market funding rates and Bitcoin deposits into exchanges were spotted before the drop.

The Bitcoin futures market uses a mechanism called “funding” to incentivize traders based on the balance of the market.

For example, if there are more buyers or long contract holders in the Bitcoin futures market, short-sellers are incentivized to sell or short. When this happens, the funding rate increases, making it expensive for traders to long Bitcoin.

Before the drop, the futures funding rate of BTC was hovering in the 0.05% to 0.1% range, which is five to ten times higher than the default 0.01% funding rate. Filbfilb explained:

“Bitcoin temporary selloff after high funding, big net BTC inflows and weekend pump. Guess people thought it was different this time.”

High Bitcoin inflows into exchanges likely fueled the drop because whales often deposit BTC into exchanges when they intend to sell.

Therefore, the combination of the selling pressure coming from whales and the high futures funding rate was the likely reason behind today’s pullback.

How stablecoin inflows can further fuel the BTC rally

But despite, the halt in the rally, stablecoin inflows into exchanges are rising once again, according to the latest data from CryptoQuant. 

In the crypto market, traders often hedge their holdings against stablecoins like Tether (USDT) and USDC, rather than cashing out via withdrawals to bank accounts.

Typically, exchanges have a three to seven-day processing period for cash deposits, and when traders want to re-enter the cryptocurrency market, moving cash from their bank accounts back to exchanges becomes cumbersome.

BiTC exchange reserve (blue), stablecoin inflows (green) vs. BTC price (yellow). Source: CryptoQuant

Hence, when stablecoins begin to flow into exchanges again — as seen by the green spikes in the chart above — it suggests that sidelined capital may be looking to get back into Bitcoin. 

Ki Young Ju, the CEO of CryptoQuant, wrote:

“There were many stablecoins inflow transactions to exchanges very frequently. 100-287 stablecoins deposits in each ETH block(15 seconds). I think we’ll see more pumps on $BTC or $ETH in the short-term.”

Throughout the past week, the one missing component during the Bitcoin rally was stablecoin inflows. 

When Bitcoin rallies without a noticeable rise in stablecoin inflows, it increases the probability of an unsustainable uptrend and a short-term correction.

If the trend of sidelined capital moving back into the crypto market continues, there is a high probability that this will further fuel Bitcoin’s momentum resulting in a broader rally.