Lower inflows into digital asset investment products in recent weeks indicate a “persistent hesitancy” towards cryptocurrencies among institutional investors amid a slowdown in the US economy.
In the latest edition of CoinShare’s weekly “Digital Asset Fund Flows” report, CoinShare’s head of research James Butterfell highlighted stalled institutional sentiment against crypto investment products, which has seen “small inflows” for the third consecutive week:
“Flows remain low, indicating continued indecision among investors, as evidenced by investment product volumes reaching $886 million for the week, the lowest level since October 2020.”
Between September 26 and September 30, Bitcoin (BTC) investment products saw the largest inflow of just $7.7 million, with Ether (ETH) investment products approaching $5.6 million in inflows. The BTC card products represent the only other notable inflows of $2.1 million.
Those inflows were offset by more than $3.5 million in outflows from investment products that offer exposure to altcoins such as Polygon (MATIC), Avalanche (AVAX) and Cardano (ADA), while multi-asset funds and Solana funds (SOL) also lost 700 000. $400,000 and $400,000 during that week, respectively.
Markus Thelen, head of research and strategy at Singapore-based crypto-financial platform Matrixport, comments on the current state of the crypto market and recent institutional outlook:
“The market is currently in a wait-and-see environment, while a potentially positive turn after the US mid-term elections could have significant regulatory changes.”
“Last night, US economic data, particularly the ISM index, showed that growth has slowed significantly in the US economy, and there is now a possibility that the Fed will become less hawkish. The rise in the dollar appears to have lost one of its main drivers, and this could signal a pause in price increases. Interest. This could be very positive for digital assets through the end of the year.”
Looking at month-to-date (MTD) inflows as of September 30, ETH products were the most unloaded by institutional investors despite the September 15 merger, with outflows of $65.1 million.
“Looking back, the consolidation was not good for sentiment with outflows totaling $65 million in September. Increased regulatory scrutiny and a stronger dollar is likely why the move to proof of stake has been implemented,” Butterfly said.
In contrast, BTC short funds and BTC investment products saw small inflows of $15.2 million and $3.2 million per day.
Crypto ETFs float slowly
While there has been limited action recently for crypto investment products tracked by CoinShares, Bloomberg Intelligence has noticed a notable trend in crypto exchange-traded funds (ETFs).
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According to data from Bloomberg Intelligence, institutional investors dumped $17.6 million from crypto-traded funds during the third quarter of 2022, providing a stark contrast to “the record $683.4 million withdrawn from these funds” in other quarter 2022.
The outflows have mainly occurred in the last two months. In July, investors poured over $200 million into crypto-traded funds,” Bloomberg noted in a Sept. 30 article, adding that the drop in outflows was likely due to “steep swings” in cryptocurrency prices in the third quarter.
