Digital Asset Funds See Largest Weekly Outflows at $255M Amid Banking Crisis
A new report by CoinShares showed that digital asset investment products saw $255 million in outflows last week amid negative sentiment caused by Silvergate Bank and Signature Bank being closed and taken over by regulators. The figure marks the most significant single weekly outflows on record.
Digital Asset Funds See Outflows for 5th Consecutive Week
Digital asset investment products saw the largest weekly outflows of $255 million last week as institutional investors jumped ship in the wake of the turmoil in the crypto banking sector triggered by the closures of Silvergate and Signature banks. This marks the 5th consecutive week of outflows for digital asset funds, accounting for 1% of total assets under management (AuM).
“While the outflows are the largest on record, they aren’t when expressed as a percentage of total AuM, that record was in May 2019 when US$51m of outflows were seen. It highlights just how much total AuM has risen since May 2019 (816%).”– the CoinShares report states.
Still, AuM declined by 10% last week, dropping to the levels registered at the start of the year. Furthermore, the outflows nullified all inflows seen in digital asset funds this year at $82 million year-to-date.
Like a week earlier, negative sentiment was mostly directed toward Bitcoin investment products, with total outflows of $244 million last week. Short-bitcoin funds have also seen minor outflows of $1.2 million, though it is now the investment product with the most significant inflows in 2023, totaling $49 million.
Ethereum-related investment products saw outflows of $11 million over the week, pushing its year-to-date fund flows into the red at $3 million. Several altcoins registered inflows, including Solana ($0.4m), XRP ($0.3m), and Polygon ($0.1m).
On a regional basis, there was a noticeable negative sentiment across North America and Europe, particularly in Canada and Germany, where outflows hit $229.7m and $24.1m, respectively. The United States was the only exception, recording inflows of nearly $11m, mostly into long-bitcoin products.
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Institutional Investors Stand Back amid Crypto Banking Rout
The latest CoinShares report highlights how much the ongoing rout spooked institutional investors in the crypto banking space.
Last week, Silvergate Bank, one of the biggest crypto-friendly banks, announced its impending liquidation. The move came as they struggled to deal with mounting pressures after the FTX collapse in November 2022.
More recently, another crypto banking giant, Signature Bank, was shut down by US regulators due to “systemic risk.” The decision came after authorities closed Silicon Valley Bank in the largest collapse since the global financial crisis in 2008. Banking regulators, including Federal Reserve and US Treasury, said depositors of both banks would receive all of their stuck deposits.
Do you think the fall of Silvergate and Signature banks could trigger another major setback in institutional activity in the coming months? Let us know in the comments below.