Investor confidence in cryptocurrency investment products has significantly eroded, leading to a substantial two-week sell-off across the market. This prolonged period of capital flight has resulted in billions of dollars exiting crypto-related exchange-traded products (ETPs) and a dramatic reduction in overall assets under management.
Sustained Outflows and Plummeting AUM
Crypto investment products have experienced their second consecutive week of massive capital outflows, totaling USD 3.43 billion over the past fortnight. This bearish trend has pushed year-to-date flows into negative territory, with a net withdrawal of USD 1 billion. According to CoinShares, these outflows are attributed to a confluence of factors, including the appointment of a more hawkish U.S. Federal Reserve chair, ongoing large-scale selling linked to the four-year market cycle, and heightened geopolitical volatility. Consequently, total assets under management (AUM) in crypto funds have plummeted to USD 165.8 billion, representing a significant loss of USD 73 billion since October.
Bitcoin and Altcoins Bear the Brunt
Bitcoin (BTC) products bore the brunt of these withdrawals, accounting for a dominant share of the outflows with USD 1.32 billion leaving BTC investment vehicles weekly, culminating in USD 733 million in year-to-date outflows. Ether (ETH) funds also registered substantial weekly losses of USD 308 million, contributing to USD 383 million in year-to-date withdrawals. Solana (SOL) and XRP (XRP) products were not immune, experiencing outflows of USD 31.7 million and USD 43.7 million, respectively. In stark contrast to the prevailing sentiment, short Bitcoin products saw inflows of USD 14.5 million, reflecting a growing bearish outlook among some investors.
Issuers Affected and Market Sentiment
The widespread outflows impacted most issuers, with BlackRock's iShares ETFs leading the charge with USD 1.2 billion in withdrawals. Grayscale Investments and Fidelity also faced significant capital reductions, with outflows of USD 300 million and USD 197 million, respectively. However, a few firms defied the trend, with ProFunds Group and Volatility Shares recording positive inflows of USD 139 million and USD 61 million. The market's overall sentiment has deteriorated sharply, with the Crypto Fear & Greed Index currently registering "extreme fear" at a score of 14, indicating a strong likelihood of continued negative pressure on crypto funds in the absence of a swift market rebound.
