Digital Asset Funds Record Net Outflows for 4th Week Amid Uncertainty
Image courtesy of 123rf.

Digital Asset Funds Record Net Outflows for 4th Week Amid Uncertainty

Digital asset funds saw $17 million in net outflows last week as regulatory pressure continues to weigh on investor sentiment.
Neither the author, Ruholamin Haqshanas, nor this website, The Tokenist, provide financial advice. Please consult our website policy prior to making financial decisions.

Digital asset investment products recorded the fourth consecutive week of outflows last week as regulatory pressure weighed on investor sentiment. More specifically, digital asset funds saw $17 million in net outflows—with Bitcoin funds in the spotlight, recording $20 million in outflows.

Bitcoin Funds See $20M in Outflows

Digital asset funds saw another weekly withdrawal amid mounting regulatory pressure. Digital asset investment products saw outflows totaling $17 million last week, marking the fourth consecutive week of negative sentiment, according to the latest report by CoinShares. 

“Volumes across investment products were low at US$844m for the week, but a similar situation was seen for the entire Bitcoin market volumes, averaging US$57bn, 15% lower than usual,” the report said. CoinShares noted that, regionally, sentiment has improved in the US, which saw inflows totaling $7.6 million compared to $23 million outflows in Europe.

Bitcoin products marked the most significant outflows, experiencing $20 million in withdrawals. On the other hand, short-bitcoin products saw minor inflows for a third week totaling $1.8 million. However, despite the continued inflows into short-bitcoin, total assets under management (AuM) have risen by only 4.2% YTD. 

In comparison, long-bitcoin AuM has increased by 36% YTD, suggesting short positions have not delivered the returns some investors expected. “Nonetheless, it likely represents continued investor concerns over regulatory uncertainty for the asset class,” the report said. 

Ethereum investment products, on the other hand, saw minor inflows totaling $0.7 million. Other major altcoins, including Solana, Binance Coin, and Cosmos, saw $0.34 million, $0.38 million, and $0.21 million in inflows, respectively.

As reported, digital asset investment products recorded $32 million in net outflows last week for the last week, marking the most significant withdrawals since December 2022. 

It is worth noting that digital asset funds saw a record $117 million in inflows in the last week of January, the largest in over six months. The record inflows came as Bitcoin and the broader crypto market rallied higher earlier this year. 

Join our Telegram group and never miss a breaking digital asset story.

Regulatory Pressure Continues to Affect Investors

One likely reason behind the recent outflows is the current regulatory pressures in the US crypto market, which continues to drive away institutional investors. The regulatory crackdown could intensify further in the coming weeks as the Silvergate drama unfolds. 

Last week, crypto-friendly bank Silvergate delayed submitting its required 10-K filing (comprehensive annual financial report) to the SEC, citing concerns about being “less than well-capitalized.” The company’s shares went on a free fall following the announcement. 

While Silvergate scrambles to find a solution, digital asset companies that dealt with the bank are looking for the exits. So far, Coinbase, Paxos, Circle, CBOE Digital, Galaxy Digital, Bitstamp, and have announced their withdrawal, no longer accepting or receiving payments via Silvergate.

The development comes as the SEC charged the crypto exchange Kraken $30 million in fines for breaching US securities law with its staking product last month. Similarly, the New York financial regulator ordered Paxos to stop minting new Binance USD (BUSD) tokens, while the SEC pledged to take enforcement action against the blockchain infrastructure firm. 

Finance is changing.
Learn how, with Five Minute Finance.
A weekly newsletter that covers the big trends in FinTech and Decentralized Finance.

Do you think investor sentiment will improve next week? Let us know in the comments below.