CPI Report Shows $932M Crypto Investment Funds Inflows

CoinShares pointed out that most inflows were due to Wednesday’s CPI report, with 89% of the weekly activity occurring in the last three days.

According to the latest CoinShares data, digital asset investment funds attracted a massive capital inflow of $932 million in only one week. This significant capital affirmation continued the previous week’s run, in contrast with a stock market decline.

The main reason for the inflow surge of May 13th – 17th is the market’s response to U. S. Consumer Price Index (CPI) report, which predicts that inflationary pressures would ease. The April figures were $5 billion compared to the $40 billion recorded in March. CoinShares pointed out that most inflows were due to Wednesday’s CPI report, with 89% of the weekly activity occurring in the last three days.  

The May 15 CPI results reported a 0.3% rise in April, a 4% increase in March, and an annual growth of 3.4%. This inflation is mainly due to large increases in energy and food prices. CoinShares Research's earlier analyses revealed a realignment of Bitcoin price dynamics with market interest rate expectations fueled by the January approval of the US spot Bitcoin exchange-traded funds (ETFs).

Under this scenario, Grayscale Bitcoin ETF recorded weak flows of $18 million for the week. However, as an ETF since January, the fund witnessed significant outflows of $16.6 billion. In the region, Hong Kong and Canada saw outflows of $83 million and $17 million, respectively.

In the past week, altcoin funds also received a fresh inflow of money. Solana (SOL), Chainlink (LINK), and Cardano (ADA) saw investments of $9 million, $3.7 million, and $1. 9 million, respectively. Moreover, Ether (ETH) funds had outflows of $23 million as investors remained in limbo regarding the prospect of spot Ether ETFs by the Securities and Exchange Commission (SEC). The SEC expects to make the first decision around these issues by May 23.

Taking a fresh view of the SEC talks, ETF analysts James Seyffart and Eric Balchunas have updated their predictions on accepting spot Ether ETFs. At first, in disbelief, they now give their approval odds at 75%, which stands as a significant shift, the most recent regulatory signs.  

Venture capital funding in crypto rises to $2.4 billion

PitchBook data indicate that funding has increased by 40.3% to $2.4 billion and was distributed across 518 transactions. In the venture capital movements, the quarterly average share in global investments was at a near five-year low during the same period.  

The increase in startup financing happens within the overall financial market environment, where lower interest rates are anticipated, and the U.S. introduced a massive volume of the first-ever Bitcoin spot ETF. Improvements in regulation, as triggered by industry leaders such as BlackRock and Fidelity, led Bitcoin to a new record high of $73,803 in March. Robert Le, PitchBook analyst, added:  

"The recovery in publicly traded tokens and continued rise in institutional adoption will drive increased VC funding,"  

With this in mind, the startups that would benefit most from the increased funding activity are companies specialising in the crucial infrastructure required for the success of crypto and blockchain technologies. This quarter's biggest investment was in Together AI, a decentralised cloud platform, which got $106 million in an early-stage investment round, with Salesforce Ventures as the main investor, bringing the company's value to $1 billion.  

"The investment rounds have become highly competitive, especially at the early stages," PitchBook's Le said. "This is compounded by the fact that early-stage deals are earning higher valuations than late-stage deals but.. we will see if this trend holds in the coming quarters."

Although fundraising activity is strong, exits are relatively small. However, as the market continues to mature and consolidate, we can expect an increase in M&A among exchanges, custodians, and infrastructure providers later this year.