Recently, crypto-related investment products witnessed outflows amounting to $528 million, ending a promising four-week streak of inflows.
This data, obtained from CoinShares’ latest weekly report, paints a grim picture of the current state of the crypto market. The outflows are a direct result of growing concerns over a potential US recession, ongoing geopolitical tensions, and a broad market sell-off that has impacted major cryptocurrencies.
James Butterfill, the head of research at CoinShares, elaborated on these developments, attributing the outflows to mounting fears of an economic downturn in the US. The geopolitical landscape, alongside a broader liquidation trend, has worsened these fears, leading to significant capital flight from crypto exchange-traded products (ETPs).
Adding to the concerning scenario, CoinShares’ report highlighted that the trading volume for these ETPs was notably below average, clocking in at $14.8 billion. This figure represents merely 25% of the total market, indicating a sharp decline in trading activity.
The recent market correction further compounded these issues, slashing the value of ETPs’ assets under management (AUM) by $10 billion, bringing the total down to $89.6 billion.
Crypto ETPs: Current Market Sentiment
The report also sheds light on emerging bearish sentiments surrounding Bitcoin. For the first time in five weeks, the leading digital asset saw outflows totaling $400 million. This stark shift in investor sentiment suggests a growing lack of confidence in Bitcoin’s short-term price prospects.
Conversely, products that bet against Bitcoin, known as short-Bitcoin products, recorded an inflow of $1.8 million. This indicates that a portion of investors are now positioning themselves to profit from a potential decline in Bitcoin’s value. The move aligns with broader trends in the market, where US Bitcoin exchange-traded funds (ETFs) experienced net outflows exceeding $80 million last week. Significant contributors to these outflows included Grayscale’s Bitcoin Trust (GBTC) with $806 million, Fidelity’s FBTC with $193 million, and Ark 21 Shares’ ARKB with $123 million.
Crypto ETPs: Impact on Ethereum and Other Cryptocurrencies
The bearish trend extended beyond Bitcoin, affecting Ethereum as well. According to reports, the second-largest cryptocurrency by market capitalization saw outflows totaling $146 million. This brings Ethereum’s total net outflows to $430 million since the launch of spot Ethereum ETFs in the US. European crypto ETPs also played a role in the negative flow trend, contributing minimally to the overall outflows.
Butterfill noted that the outflows were significantly influenced by Grayscale’s Ethereum Trust (ETHE), which alone accounted for $603 million. This overshadowed the inflows seen by other Ethereum ETF issuers, further highlighting the bearish sentiment prevailing in the market.
Other cryptocurrencies, such as Cardano and BNB, saw minimal activity in ETP trading. However, Solana stood out with outflows of $2.8 million, indicating that it wasn’t immune to the broader market sentiment.
Regionally, the US was the hardest hit, experiencing outflows of $531 million. This was followed by Germany and Hong Kong, which saw outflows of $12 million and $27 million, respectively. In contrast, some regions appeared to capitalize on the market dip. Canadian and Swiss investors, for instance, recorded inflows of $17 million and $28 million, respectively, suggesting a more optimistic outlook in these areas.
With the current wave of outflows from crypto ETPs, there comes a growing unease among investors amid fears of a looming recession and global market instability. This marks a stark reversal from the optimistic inflow trends observed over the past month. As bearish sentiments take hold, particularly around major cryptocurrencies like Bitcoin and Ethereum, the market’s path forward remains uncertain.
Investors will need to navigate this turbulent period with caution, keeping a close eye on economic indicators and geopolitical developments that could further impact the crypto landscape. While some regions and investors are seizing the opportunity to buy the dip, the overall sentiment suggests a cautious approach as the market braces for potential further downturns.
For more news and updates on crypto ETPs and the broader cryptocurrency market, stay tuned to TurkishNY Radio.
