Crypto funds return to outflows amid market crash and bitcoin ETF sentiment

Quick Take

  • Digital asset investment products saw outflows of $55 million last week, influenced by the crypto market crash and sentiment surrounding the SEC’s approval of a spot bitcoin ETF.
  • Bitcoin, Ether, Polygon, Litecoin and Polkadot products all faced outflows, with Bitcoin leading the pack at $42 million. XRP products bucked the trend, however.

Crypto investment products at asset managers such as Grayscale, Bitwise and ProShares returned to outflows of $55 million last week in a reversal from the prior week’s inflows of $28.5 million.

The change in fortunes was attributed to the crypto market crash on Thursday — which saw bitcoin and ether abruptly fall around 10% and 15%, respectively. It was also impacted by sentiment surrounding spot bitcoin ETF approvals not being imminent, according to CoinShares’ latest report.

Last week, the widely anticipated decision in the ongoing case between Grayscale Investments and the Securities and Exchange Commission — which could see the GBTC product converted into a spot bitcoin ETF and influence other pending applications — was not forthcoming.

Digital asset ETP net new assets. Image: CoinShares.

Digital asset ETP net new assets. Image: CoinShares.

Bitcoin leads the outflows, while XRP bucks the trend

Bitcoin led with outflows totaling $42 million, a sharp reversal from the $27 million inflows observed the previous week. Short bitcoin investment products continued a near 17th consecutive week of outflows.

Altcoins weren't spared either. Ether investment products saw outflows of $9 million, while Polygon, Litecoin and Polkadot funds recorded outflows of $0.9 million, $0.6 million and $0.5 million, respectively.

However, XRP products bucked the trend, adding $1.2 million to a 17-week streak of inflows, totaling $12 million year-to-date.

The outflows were predominantly concentrated in Canada ($36 million) and Germany ($11 million). In contrast, Switzerland experienced minor inflows totaling $3.5 million. U.S.-based crypto funds saw outflows of $5.5 million.

The negative market sentiment also impacted blockchain equities, which saw outflows of $6 million over the past week.

Market volumes remain below average

Recent CryptoQuant data shows the broader crypto spot and derivatives volume spiked on Thursday due to long liquidations during the crash. But volumes have now plummeted again.

Bitcoin spot and derivative trading volume. Image: CryptoQuant.

Bitcoin spot and derivative trading volume. Image: CryptoQuant.

That corresponds with spot volumes in the latest Kaiko report, which noted the “last four months have had the lowest average daily volume since October 2020, when BTC was at $10,000 and ETH at $350.”

Average daily volume. Image: Kaiko.

Average daily volume. Image: Kaiko.

And the same is true for digital asset funds.

“Market volumes remain well below average, primarily due to seasonal effects, leaving prices vulnerable to large trades,” CoinShares Head of Research James Butterfill said. “With the panic last week leading to a 10% decline in total assets under management, settling at $32.3 billion at the end of last week.

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