According to a study released by digital asset manager CoinShares on Monday (Jan 10), cryptocurrency investment products and funds saw net outflows at a record $207 million last week, as prices continued to fall in the first trading week of the year.
The industry has seen four weeks of withdrawals totaling US$465 million, or 0.8% of total assets under management, since mid-December.
Bitcoin, the world’s most valuable cryptocurrency by market capitalization, witnessed withdrawals of US$107 million in the week ending January 7.
The outflows were a “direct response,” according to CoinShares investment strategist James Butterfill, to the Federal Open Market Committee minutes, which indicated the US Federal Reserve’s concerns about growing inflation and “the anxiety among investors of an interest rate hike.”
Because of tighter liquidity conditions and higher market volatility, the Fed’s policy tightening is a negative factor for risk assets like cryptocurrencies.
Investor activity has been more than usual in the last four weeks, according to Coinshares.
Bitcoin has lost over 10% of its value against the US dollar since the beginning of the year. For the first time since September 2021, it dipped below US$40,000 on Monday.
“A phase of heavy loss realisation by top buyers has followed the Dec 4 flush-out (in Bitcoin),” said blockchain data provider Glassnode in its latest research report on Monday.
“In the weeks since, on-chain behaviour has been more heavily dominated by (long-term holders)… with little activity by newer market entrants,” it added.
Ethereum-based products had outflows of US$39 million last week, posting five straight weeks of outflows with a total of US$200 million. CoinShares said that on a proportional basis, Ethereum’s outflows were 1.4 per cent of total assets under management, higher than that of Bitcoin.
Blockchain-linked equity investment products did not escape the negative sentiment for the sector, with outflows of US$10 million last week.
Assets under management at Grayscale and CoinShares, the world’s two largest digital asset managers, fell from their highs to US$38.2 billion and US$4.3 billion respectively.