Crypto Fund Outflows Rise

Investments in digital asset funds have decreased for the second consecutive week, with $206 million in withdrawals from April 15-19, according to data from digital asset investment firm CoinShares.

Bitcoin funds were the most affected, with $192 million pulled from the market ahead of the anticipated halving event. Ether investment products also experienced outflows totalling $34 million, marking their sixth consecutive week of negative flow. Blockchain equities have not been immune to this trend, with the sector recording its 11th consecutive week of outflows, totalling $9 million.

CoinShares attributed the ongoing downturn to investor concerns about rising interest rates in the United States, which could make less risky financial instruments more appealing compared to volatile assets like cryptocurrencies. The Federal Reserve’s anticipated easing of monetary policy in mid-2024 has faced setbacks due to recent inflation data. The annual Consumer Price Index in March increased by 3.5%, surpassing expectations for the third consecutive month, suggesting that lower interest rates may not materialise until 2025. The federal funds rate currently ranges between 5.25% and 5.50%.

CoinShares noted that investors’ appetite for exchange-traded products (ETPs) and exchange-traded funds (ETFs) has waned, possibly due to expectations of prolonged high-interest rates. While trading volume for Bitcoin ETFs fell slightly to $18 billion over the week, outflows from Bitcoin funds do not necessarily signal a bearish trend. CoinShares explained that although investors are withdrawing from volatile assets, they are not necessarily betting on a major Bitcoin price crash.

“These volumes represent a lower percentage of total Bitcoin volumes (which continue to rise) at 28%, compared to 55% a month ago,” the report stated.

The decline in fund inflows coincides with a slowdown in interest in Bitcoin ETFs since their peak in March. Despite this, BlackRock’s iShares Bitcoin Trust (IBIT), the largest Bitcoin ETF by assets under management, maintained a steady level of investor interest, drawing $1.4 billion in positive flows as of April 19.

As investors navigate a turbulent market landscape with increasing concerns over US monetary policy, the ongoing shift away from digital assets underscores the complex dynamics between traditional and digital finance. While the current outflows reflect a cautious stance, the broader trajectory for cryptocurrencies and blockchain-related investments remains uncertain.