Wednesday, February 21, 2024

US Regulatory Campaign Leads to Inflows of $32 Million Digital Asset: CoinShares


Institutional investors may have grown weary about cryptocurrencies in the wake of the regulatory crackdown in the United States, where digital asset investment products saw the largest weekly outflow in 2023.

in feb. 20, institutional crypto fund manager CoinShares reported that digital asset investment products saw outflows totaling $32 million last week, the largest outflow this year.

The outflow follows a widespread crackdown on the US digital asset industry that has targeted everything from staking services to stablecoins to cryptocurrency custody as the Securities and Exchange Commission intensifies what industry analysts have called its war on cryptocurrencies.

CoinShares analyst James Butterville added that outflows reached $62 million in the middle of last week but slowed by the end of the week as sentiment improved.

The majority of those outflows, or 78%, were from Bitcoin (BTC) related investment products and there was an inflow of $3.7 million into Bitcoin short funds. The company blamed regulatory actions for the increase in outflows.

“We believe this is due to ETP investors being less sanguine about recent regulatory pressures in the US relative to the broader market.”

However, the negative sentiment from institutional investors was not reflected in the broader markets which saw gains of 10% for the period. That pushed total assets under management for enterprise products to $30 million, the highest level since August 2022, Butterville noted.

There were also outflows for Ethereum (ETH) and hybrid asset funds, but blockchain stocks bucked the trend with inflows totaling $9.6 million for the week.

Related: Digital Asset Investment Products See Highest Inflows Since July 2022: Report

Institutions began pouring capital back into crypto funds in January with inflows in the last week of the month totaling $117 million, reaching a six-month high.

However, funds have seen outflows over the past two weeks after four weeks of inflows in January.

The regulatory enforcement action responsible for the sentiment shift includes the SEC’s accusations against staking services company Kraken in February. 9. A few days later, Paxos sued over Binance USD (BUSD) minting, and also proposed changes targeting crypto companies serving as custodians last week.