Global Crypto Fund Outflows Hit $147M—Here’s What’s Driving Investors Away

The latest report from CoinShares, a crypto asset manager, has revealed that digital asset investment products experienced a notable shift last week as $147 million in net outflows were recorded globally, ending a three-week streak of inflows.

CoinShares revealed that this ended inflow streak isn’t ordinary, as it results from a notable trend in the macroeconomic space.

Detailing The Fund Flows: Who’s Leading And Who’s Not?

According to CoinShares, the sudden outflow seen last week impacted major asset managers, including BlackRock, Bitwise, Fidelity, Grayscale, ProShares, and 21Shares, following nearly $2 billion in net inflows over the prior three weeks.

The outflows were largely led by Bitcoin-based funds, which accounted for $159 million in net outflows. In contrast, short-Bitcoin investment products attracted $2.8 million in net inflows, indicating that some investors are betting on a further downward price movement for the asset.

Ethereum-based products, on the other hand, which had just ended five weeks of outflows the previous week, resumed their negative trend, recording net outflows of $28.9 million.

James Butterfill, Head of Research at CoinShares, explained this was due to a “lackluster” investor interest in the asset. This indicates that while Ethereum had briefly stabilized in the eyes of investors, confidence in its performance has not been fully restored, resulting in continued outflows.

Meanwhile, multi-asset investment products, which provide diversified exposure across a range of cryptocurrencies, went against the overall trend by attracting net inflows of $29.4 million.

This marked the 16th consecutive week of positive flows for these products, with $431 million flowing into multi-asset funds since June.

Butterfill noted that these products have gained popularity among investors who favor a diversified approach, representing roughly 10% of assets under management (AUM) at global crypto fund managers.

Furthermore, regarding region, the largest negative flows were concentrated in funds based in the US, Germany, and Hong Kong, which lost $209 million, $8.3 million, and $7.3 million, respectively.

However, these losses were partly offset by net inflows into products based in Canada and Switzerland, which saw inflows of $43 million and $34.9 million.

The Real Reason Behind The Outflows?

Notably, the change in market sentiment, which resulted in millions of outflows, has been linked to stronger-than-expected economic data. James Butterfill, attributing the market reversal to this unexpected economic data, wrote in the report:

Higher than expected economic data last week, reducing the probabilities for significant rate cuts are the likely reason for the weaker sentiment amongst investors.

Butterfill added alongside these broader economic developments, noting:

Trading volumes were up marginally by 15% to US$10 for the week in ETP investment products, while we have seen lower volumes in broader crypto markets.

Featured image created with DALL-E, Chart from TradingView