Digital Asset Funds Saw $32M in Outflows Last Week Amid Regulatory Focus on Crypto

Digital asset investment products recorded $32m in net outflows last week, with Bitcoin funds accounting for almost 80% of the withdrawals, a CoinShares report shows. The outflow recorded was the biggest since December 2022.

Institutional Investors Likely More Reactive to Regulators

Digital asset funds saw the most significant weekly withdrawals since December 2022 last week, with total outflows of $32 million, according to the latest report by CoinShares. The outflows surged to as much as $62 million mid-week, though the sentiment notably improved by the end of the week, suggesting that institutional investors might have overreacted to recent regulatory concerns in the US.

The significant outflows coincided with last week’s crypto market rally, suggesting that the pessimism among investors of the exchange-traded products (ETP) was not present in the broader market. Bitcoin (BTH) and Ether (ETH) rose more than 14% in the past week, bringing the total assets under management (AUM) to $30 billion – the highest since August 2022.

One of the likely reasons behind this is that institutional investors were more reactive to recent regulatory pressures in the US crypto market. Last week, the New York financial regulator ordered Paxos to stop minting new Binance USD (BUSD) tokens after the US Securities and Exchange Commission (SEC) pledged to take enforcement action against the blockchain infrastructure firm. Just a few days before that, the SEC charged the crypto exchange Kraken with $30 million for breaching US securities law.

Bitcoin Funds Accounted for 80% of Outflows Last Week

Similar to the week before, Bitcoin funds led the outflows last week, recording almost $25 million in outflows out of a total of $32 million. This was followed by Ether and multi-investment investment products, which saw withdrawals of $7.2 million and $2.3 million, respectively.

Cosmos, Polygon, and Avalanche funds also attracted negative sentiment last week, registering outflows of $1.6m, $0.8m, and $0.5m, respectively. On the other hand, investment funds associated with Aave, Fantom, XRP, and Binance all saw inflows last week, indicating a very mixed investor sentiment. Meanwhile, Blockchain-related equities recorded the sixth consecutive week of inflows of $9.6 million last week.

On a regional basis, Germany and Canada attracted most of the negative sentiment last week, registering outflows of $23.1m and $10.6m, respectively. On the flip side, the only notable inflows were seen in Switzerland at $4.9m.

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