Digital asset funds see record outflows amid crypto market descend

  • The brutal correction in the cryptocurrency space last week has seen net outflows from Bitcoin and Ethereum for the first time in 17-weeks.
  • Some altcoins like Polkadot and Solana witnessed net inflows despite the price correction.

The last week has been a massive bloodbath on Satoshi Street triggered by heavy sell-offs in the crypto space. With the crypto market drifting downwards, digital asset funds have also witnessed record outflows in recent times.

As per data from Coinshares, for the week through December 17, the outflows from crypto funds have totalled a staggering $142 million thereby breaking the 17-week long run of inflows. Previously, the largest record outflow was in early June when outflows stood at $97 million.

Note that the current outflow of $142-million represents only 0.23% of the total assets under management (AUM). Of the total $142 million, Bitcoin (BTC) registered outflows of $89 million. This was still well below the $150 million outflows registered in June 2021. In its latest blog post, CoinShares notes:

While this outflow appears alarming there are several points to consider. Firstly, it comes at a time where there have been considerable outflows across all risk assets following the recent US Federal Reserve statement on tapering.

Secondly, outflows represent only 0.23% of total assets under management (AuM),and from an historical perspective are small relative to the outflows in early 2018 where weekly outflows represented up to 1.6% of AuM. Finally, the outflows come at a time of record yearly inflows peaking at US$9.5bn, relative to inflows totalling US$6.7bn in 2020.

Apart from Bitcoin, the world’s second-largest crypto Ethereum also registered net outflows. It was clear that the two heavyweights contributed to most of the market correction.

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Altcoins like Solana and Polkadot softened the blow

Not all altcoins witnessed net outflows during the last week. Altcoins like Solana, Polkadot and other multi-asset investment products witnessed net inflows during the same period. While Solana witnessed net inflows of $6.7 million, Polkadot witnessed net inflows of $2.5 million. Similarly, the multi-asset investment products had inflows at $1.5 million.

The cryptocurrency market rout over the last week has been brutal enough as investors liquidate major holdings. This comes amid the volatility seen in the global markets across the asset classes. U.S equities had corrected significantly last week amid the fears of rising Omicron variant cases as well as the tapering measures initiated by the Federal Reserve. The global markets have come under pressure witnessing strong liquidations.

As of press time, the broader crypto market is showing some signs of a bounce back. The Bitcoin price is up 3.71 percent and is currently trading at $48,650 levels. But it could be too early to say whether Bitcoin can sustain this trend reversal and head northwards.

The recovery in the altcoin space also looks moderate as Ethereum’s (ETH) price bounces back above $4,000. Terra LUNA and Avalanche (AVAX) have been leading the rally in the top ten altcoin list.

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About Author

Bhushan is a FinTech enthusiast and holds a good flair for understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In his free time, he reads thriller fictions novels and sometimes explores his culinary skills.

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