Crypto funds see largest outflows since March as bitcoin ETF sentiment sours

Quick Take

  • Digital asset investment products saw outflows of $168 million last week, marking the largest decline since March.
  • Bitcoin faced the brunt of outflows totaling $149 million, while ether recorded outflows of $16.8 million.

Crypto investment products at asset managers such as Grayscale, 21Shares, Bitwise and ProShares saw outflows totaling $168 million last week, marking the largest decline since March and adding to $55 million in outflows the prior week.

The decline in sentiment was attributed to growing acceptance that the introduction of a spot bitcoin ETF in the U.S. might take longer than anticipated, CoinShares Head of Research James Butterfill said in the digital asset manager’s latest report.

August’s outflows now total $278 million, with only one week registering inflows of $28.5 million following U.S. inflation data that came in slightly below expectations. August has also witnessed notably low trading volume, Butterfill added, with investment products trading at $1.3 billion for the week — 16% below the yearly average.

Weekly crypto asset flows. Image: CoinShares.

Weekly crypto asset flows. Image: CoinShares.

Short bitcoin positions also offloaded

Bitcoin led the move as usual with outflows of $149 million. However, bitcoin investment products maintained a positive net flow for the year, totaling $265 million.

Interestingly, many investors also continue to offload their short bitcoin positions, resulting in outflows of $4 million during the past week. This trend has been ongoing for 18 consecutive weeks.

Ether investment products weren't spared either, registering $16.8 million in outflows. However, XRP, Litecoin, Cardano and Solana products fared better, seeing minor inflows totaling $0.5 million, $0.4 million, $0.2 million and $0.1 million, respectively.

The negative sentiment wasn't confined to a specific region, seeing widespread outflows across geographies. However, Germany and Canada, which have seen the most activity in recent months, witnessed outflows of $68 million and $61 million, respectively. The U.S. saw the third-largest outflows, totaling $19.5 million.

Largest outflow since US regulatory crackdown

The last time outflows approached these levels was following a U.S. regulatory crackdown on crypto exchanges in March.

On March 22, Coinbase was issued a Wells Notice by the Securities and Exchange Commission, notifying the company of investigations into its staking service, Coinbase Earn and Coinbase Wallet. The crypto exchange was later sued by the SEC in June, alleging it had violated securities laws.

On March 27, the Commodity Futures Trading Commission sued Binance and its CEO Changpeng "CZ" Zhao for allegedly violating federal laws and not registering the exchange in the U.S. The crypto exchange was also later sued by the SEC in June.

Finally, on March 29, Beaxy was charged by the SEC after allegedly failing to register as an exchange, broker and clearing agency. It subsequently ceased operations.

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