A new report from institutional crypto fund manager CoinShares has revealed that digital asset investment products saw outflows totaling $32m last week, the largest since late December 2022.
The report also indicates that investors have been fleeing from cryptocurrency investments in droves, as the negative sentiment towards Bitcoin and other digital currencies continues to grow.
The impact of SEC’s crackdown
The negative sentiment amongst ETP investors was not expressed in the broader market, with Bitcoin prices rising by 10% over the week, and this price appreciation pushed total assets under management (AuM) to $30bn, their highest level since August 2022.
In comparison to the overall market, Coinshares thinks this is because investors in exchange-traded products (ETPs) have a more pessimistic outlook about recent regulatory challenges in the United States.
The fund manager’s report suggests that SEC’s crackdown on cryptocurrency is causing investors to be concerned about the safety and security of their investments.
The report highlights that the negative sentiment amongst ETP investors was not expressed in the broader market, with Bitcoin prices rising by 10% over the week, this price appreciation pushed total assets under management (AuM) to $30 billion, their highest level since August 2022.
Bitcoin bore the brunt of the negative sentiment, seeing nearly $25m of outflows, while short-bitcoin investment products saw inflows of $3.7 million and have seen some of the largest inflows YTD of $38m, second only to Bitcoin with $158m.
The negative sentiment was very mixed, with Ethereum, Cosmos, Polygon, and Avalanche seeing outflows of $7.2m, $1.6m, $0.8m, and $0.5m, respectively. While Aave, Fantom, XRP, Binance, and Decentraland all saw inflows between $0.36m — $0.26m.
Blockchain equities, on the other hand, saw inflows totaling $9.6 million last week and have seen 6 consecutive weeks of inflows, highlighting a more constructive sentiment among investors.
Impact of the FTX collapse
In its fourth-quarter report for 2022, institutional crypto fund manager CoinShares highlighted the firm remained “financially robust” despite dealing with the FTX collapse at the end of the year.
The fund also presented its wins, such as its graduation to Nasdaq Stockholm’s primary market and strong levels of inflow into CoinShares physical exchange-traded products.
According to the report, the FTX exchange had more than $31 million worth of assets that were unable to be moved when it declared bankruptcy.
The report suggests that despite the challenges brought about by the collapse of the exchange, some hedge funds managed to survive and stay afloat, while others decided to close operations.
CoinShares CEO Jean-Marie Mognetti wrote that FTX’s bankruptcy “had a significant impact” on the firm’s capacity to deploy its algorithmic trading platform, HAL, in Europe.
Despite this, Mognetti also wrote that the firm would move into 2023 with clear goals, such as focusing on expanding its digital asset management business and institutional offerings.
It remains to be seen how investors will respond to the ongoing regulatory and market challenges that the cryptocurrency market is experiencing, as well as what the future holds for the sector as a whole.