Digital Asset Funds See 5th Week of Consecutive Net Outflows
Digital asset investment funds have recorded the fifth consecutive week of outflows, with another $32 million exiting over the seven days ending on May 21. Bitcoin funds were again in the spotlight, recording $33 million in outflows.
Bitcoin Funds Saw $33M in Outflows Last Week
Digital asset funds saw another weekly withdrawal amid mounting regulatory pressure. Digital asset investment products saw outflows totaling $32 million last week, marking the fifth consecutive week of negative sentiment, according to the latest digital asset weekly fund flows report by CoinShares.
The report noted that over $232 million, representing 0.7% of total assets under management, have been withdrawn since mid-April. The flagship cryptocurrency has accounted for most of that outflow, as evidenced by the $33 million withdrawn from Bitcoin funds last week alone.
“Volumes totalled US$900m for the week, 40% below this year’s average. Volumes for the broader market on trusted exchanges hit their lowest level since late-2020 at US$20bn for the week.”
Germany saw the largest outflows, accounting for 73% or $24 million of all outflows. This was followed by the United States and Switzerland, which saw $5 million and $3.3 million in outflows, respectively. Meanwhile, minor inflows were seen in Brazil ($1.3 million) and Canada ($2.2 million).
Likewise, short-bitcoin products saw minor outflows totaling $1.3 million. “Combined outflows for these investment products now total US$235m over the last five weeks,” CoinShares said, adding that it is “unclear why there is such coordinated negative sentiment for both long and short investment products.”
Ethereum investment products also saw $1 million in outflows. However, other altcoins, including Avalanche and Litecoin, saw inflows totaling $0.7 million and $0.3 million, respectively.
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.
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Outflows Show Institutional Investors Are Wary of Crypto Markets
Digital asset fund flows, also called asset flows, measure the net movement of cash into and out of investment vehicles like mutual funds and exchange-traded funds (ETFs). Fund flows can be a good measure to gauge how institutional investors move their money.
Inflows may suggest that investors are optimistic about potential future returns. On the other hand, outflows could suggest investors are becoming wary of the market. Therefore, the $232 million withdrawn from digital asset funds over the past five weeks suggests that institutional investors are becoming mindful of the industry.
One likely reason behind this might be 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 US debt drama unfolds.
The US is facing a potential debt default, as President Joe Biden and congressional Republicans remain at odds over raising the $31.4 trillion borrowing limit. Republican leaders have demanded pledges of future spending cuts before they approve a higher ceiling.
The rising uncertainty has even pushed Circle, the issuer of the second-largest stablecoin in circulation, to rebalance its treasury holdings amid growing concerns over a potential US debt default. The company has opted for a mix of reserves that favors short-dated US Treasuries.
Meanwhile, US President Joe Biden has warned that he will not ink a debt ceiling agreement that would benefit crypto traders. “I’m not going to agree to a deal that protects wealth tax cheats and crypto traders while putting food assistance at risk for nearly 1 million Americans,” he said during the final day of G7 talks in Japan.
Why do you think institutional investors are moving money out of crypto? Let us know in the comments below.