Digital Asset ETFs Record Second Consecutive Week of Net Outflows

According to the latest report by CoinShares, digital asset investment products recorded $72 million in outflows last week, marking a second consecutive week of negative sentiment. The outflows are likely a result of an impending interest rate hike and a continuation of banking turmoil as US regulators seize control of the First Republic Bank.

Digital Asset Investment Products See More than $100M in Net Outflow Over Last Two Weeks

Digital asset funds saw a second consecutive week of outflows as investors await the interest rate decision at the Federal Reserve’s policy meeting on May 3. Outflows last week rose to $72 million, up from $30 million in the week prior.

Most of the time, Bitcoin-related funds accounted for the most outflows last week of $46 million, while short-Bitcoin investment products recorded their most significant outflows since December 2022, totaling $7.8 million. Still, short-bitcoin funds remain the asset with the highest year-to-date inflows of $119 million.

Ethereum also saw outflows of $19 million last week, marking its largest week of negative fund flows since the Merge in mid-September last year. Some of the altcoins, such as Solana, Algorand, and Polgyon, registered minor inflows last week of $0.2 million, $0.17 million, and $0.14 million, respectively.

According to CoinShares, volumes remain suppressed in the broader crypto market, as much as 50% less than the year average. Meanwhile, exchange-traded product (ETP) volumes were 16% higher than the year average last week, at $1.7 billion.

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A Looming 25 BPS Interest Rate Increase and First Republic Collapse Put Pressure on Crypto Prices

The two back-to-back weeks of outflows come after digital asset funds recorded three consecutive weeks of notable inflows amid a general improvement in sentiment in the asset class. That optimism was reflected in Bitcoin’s price, which exceeded the $30,000 threshold in mid-April.

However, the world’s number one cryptocurrency’s price dropped below $28,000 on Monday as US federal regulators prepared to take control of the embattled First Republic Bank. In addition, investors are anxiously awaiting the Federal Open Market Committee (FOMC) monetary policy meeting, set to take place on Tuesday and Wednesday.

According to the CME’s FedWatch tool, the US central bank will most likely deliver another 25 basis points (bps) interest rate hike, which would be its third this year. Another rate increase of that size would raise the target range to between 5% and 5.25%, and many believe this could be the Fed’s final hike, at least for the time being.

Do you think outflows in digital asset funds will stop if the Fed stops increasing interest rates after tomorrow? Let us know in the comments below.