Institutional crypto fund outflows continue for ninth week in a row

Over the past nine weeks, crypto funds have lost $423 million. The previous time investments were reduced so quickly from April to June 2022. At the end of the reporting week, the situation was smoothed out by small inflows amid information about BlackRock filing an application with the SEC to launch a spot bitcoin ETF. But investors withdrew $5.1 million from digital asset funds last week.

The modest outflows of $5.1 million pale in comparison to the massive $88 million withdrawn by investors the previous week when the crypto market was shaken by high-profile lawsuits from the U.S. Securities and Exchange Commission (SEC) against Coinbase and Binance. These lawsuits classified numerous altcoins as securities. In total, investors have pulled a staggering $423 million from funds over the past nine weeks, underscoring the cautious sentiment prevailing in the market.

CoinShares attributes the relatively lower outflows to the impact of BlackRock’s Bitcoin exchange-traded product (ETP) proposal. According to James Butterfill, Head of Research at CoinShares, minor inflows of $5 million were recorded on Friday following the news of BlackRock’s application. However, these inflows were insufficient to offset the earlier outflows experienced during the week. Additionally, over 85% of the weekly inflows were directed towards Grayscale, which controls the Grayscale Bitcoin Trust (GBTC), as investors sought to take advantage of the dip.

The recent outflows were primarily concentrated in products tracking the price of Ethereum, with $5 million exiting the market. However, the selling pressure on digital asset funds was partially offset by investors purchasing altcoins like XRP, Cardano, and Polygon. Over the past month, XRP has experienced a 4.7% gain, while Cardano and Polygon have seen declines of approximately 17% and 31%, respectively. These altcoins have faced regulatory scrutiny due to their trading on Binance and Coinbase, leading some firms to consider modifying their listings.

While the crypto industry has faced regulatory pressure and the Federal Reserve’s hawkish statements hinting at potential rate hikes, investors remain cautious. According to Butterfill, the regulatory landscape and market uncertainties continue to influence investor behavior. Nevertheless, there were modest fund deposits of $3.7 million from U.S. investors and $2.7 million from Germany. In contrast, Sweden and Switzerland experienced outflows of $3.3 million and $5.8 million, respectively. Despite a growing regulatory climate for crypto in Hong Kong, the region has not witnessed significant inflows so far this year.