Canada, Germany Drive Record $346M Into Crypto

CoinShares’ latest data underscores a significant resurgence in digital asset investment, following an influx of $346 million into crypto investment products, marking the most substantial weekly inflow in nine consecutive weeks. This surge is reminiscent of the market’s late 2021 bull run, portraying renewed investor confidence in the market’s potential.

The reported figures depict a substantial spike in inflows, propelling the total assets under management (AuM) to $45.3 billion, the highest recorded in over eighteen months. Canada and Germany emerged as dominant players, contributing 87% of the total inflow, with Canada recording $199.1 million and Germany following closely with $101.5 million.

In contrast, the United States registered a relatively modest inflow of $30 million, possibly attributed to investor anticipation of introducing a spot-based Exchange-Traded Fund (ETF) in the US market. Despite the relatively lower inflow, the US maintains significantly higher assets under management figure ($33.1 billion), which is 10X the next highest country’s holdings.

BTC And ETH Take Center Stage

Bitcoin took the lion’s share of investor interest, attracting $311.5 million in inflows, pushing year-to-date inflows beyond $1.5 billion. This surge in Bitcoin investment coincides with a retreat in short-selling activities, evident in the third consecutive week of outflows totaling $900,000 from short-Bitcoin ETPs.

Similarly, Ethereum witnessed $33.5 million in inflows, contributing to a four-week total of $103 million. This substantial uptick in inflows nearly offsets the year’s outflows. It signifies a pivotal shift in investor sentiment towards the second-largest digital asset.

Market Implications And Diversification

While investments in other cryptocurrencies like Polkadot, Solana, and Chainlink were more moderate, they indicate a burgeoning interest in diversified investment opportunities within the digital asset sector. The sustained utilization of Exchange-Traded Products (ETPs) underlines a growing preference for regulated financial instruments to gain cryptocurrency exposure.

On-chain data shows that these ETPs account for 18% of total spot Bitcoin volumes in the previous week. This trend aligns with mounting expectations surrounding a US-based spot ETF. The surge in AuM and continuous inflows across various digital assets reflect increasingly positive market sentiment, the potential of a more regulated cryptocurrency investment landscape, or a combination of both.

CoinShares highlighted that the convergence of investor sentiment and market dynamics set the trajectory for the crypto market in the foreseeable future, representing an inflection point in its evolution.

Grayscale Bitcoin Trust’s Discount Narrows To 8%

Meanwhile, recent market data from YCharts reveals that the Grayscale Bitcoin Trust (GBTC) discount rate has shrunk to 8.06%. This rate signifies the discrepancy between the market-traded price of GBTC shares and their intrinsic net asset value (NAV).

GBTC commenced trading at a discount in early 2021 following Grayscale’s suspension of GBTC redemptions. However, a gradual narrowing trend emerged in early 2023, culminating in the current 8% discount—unseen since mid-2021.

Nonetheless, experts opine that it’s improbable for the fund to return to a premium state, especially if Grayscale’s plan to convert GBTC into an Exchange-Traded Fund (ETF) materializes. Per expert projections, the transition to an ETF would eliminate any existing premium.

The recent shift in value and the broader trend toward a minimized price disparity relates to several factors, notably the mounting optimism surrounding Grayscale’s proposal to switch its GBTC into a spot Bitcoin ETF.

Optimism Surrounding The ETF Approval

The positive sentiment stems from notable developments, including Grayscale’s legal victory in June, compelling the US Securities and Exchange Commission (SEC) to review its spot ETF application. More recently, Grayscale disclosed engaging in discussions with the SEC regarding its ETF proposal, after which the asset manager submitted an updated filing.