Anticipation of ETFs has driven the largest surge in inflows into digital asset investment products since late 2021, reaching $1.7 billion over nine consecutive weeks.
Last month, Bitcoin attracted over $1 billion in inflows, bringing the total to $1.6 billion year-to-date. Ethereum also recorded inflows of $126 million, indicating a significant change in sentiment.
While Bitcoin has shown impressive returns, it is commonly believed to introduce significant risk due to its volatility when included in a traditional stock and bond portfolio.
However, CoinSharers’ research has revealed interesting findings regarding its impact on “a balanced investment portfolio.”
CoinShares’ Portfolio Review
The asset manager’s analysis in its latest blog post found that even small allocations of Bitcoin have a disproportionately positive effect on risk-adjusted returns and diversification compared to other alternative assets.
Furthermore, Bitcoin’s lack of correlation with traditional assets makes it a valuable alternative investment, providing a way to reduce exposure to economic cycles. The research also observed that quarterly adjustments (rebalancing) of Bitcoin back to its original portfolio weight can effectively reduce volatility and improve overall returns.
Bullish Sentiment Across Bitcoin and Ethereum Charts
Following Binance’s $4.3 billion settlement with the US Justice Department, the value of Bitcoin initially dropped by approximately 4%. However, it quickly rebounded the next day and has since risen to $44,000.
According to CoinShares, this upward trend is attributed to the removal of bad actors in the industry, indications from the Federal Reserve suggesting the end of interest rate hikes, and the impending approval of a spot Bitcoin ETF as a short-term catalyst.
The asset manager also highlighted the recent widening of contango in the futures market as a rare occurrence since 2018, signaling a “very bullish sentiment,” with premiums reaching well into double digits.
Consistently positive funding rates, the highest levels of trading volume and leverage since April, and a long/short ratio of 0.97 have all contributed to Ethereum’s optimistic outlook and price movement.
Additionally, the gradual increase in gas prices adds pressure to Ethereum’s deflationary characteristics, affecting its overall supply. As a result, the price movement is more pronounced due to the increased impact of buying volume.
