- Last week, crypto funds recorded their highest outflows since March 2023.
- Bitcoin remains the focus of outflows.
- The broad negative sentiment comes as the SEC continues to delay the approval of a spot Bitcoin ETF.
The crypto markets enjoyed an impressive run earlier in the year, with leading assets like Bitcoin at one point nearly doubling in price. But this market run has cooled in recent months, lacking a narrative to sustain it.
Amid the recent market lull, crypto investment products have witnessed significant outflows, tapping multi-month highs.
Crypto Funds Outflows Tap March Highs
Digital asset investment products, including XBT Provider, 21Shares, and ProShares, saw outflows totaling $168 million in the past week, according to CoinShares’ latest crypto funds outflow report released Tuesday, August 29. As highlighted in the report, last week’s outflows are the highest since March 2023, when regulatory actions against crypto exchanges impacted the market.
Bitcoin was again the primary focus, with $149 million in outflows. Ethereum also saw outflows totaling $17 million. The recent data now brings digital asset funds outflows in August 2023 to $278 million.
CoinShares Head of Research James Butterfill explained that the negative market sentiment came as investors gradually accepted that a spot Bitcoin ETF approval from the SEC might take longer than anticipated.
Meanwhile, the negative sentiment does not appear country-specific, as outflows were recorded in multiple countries. Germany and Canada led the pack with $68 million and $61.2 million, respectively, while the U.S. followed with $19.5 million.
Looming ETF Decisions
In June 2023, BlackRock, the world’s largest asset manager, joined the race for a spot Bitcoin ETF product in the U.S., sparking speculation that the SEC would soon be forced to approve the product after previous rejections.
Following a recent delay in the decision over Ark 21Shares’ application in early August 2023, the focus has turned to Grayscale’s appeal of the SEC’s decision to deny its application to convert its Bitcoin Trust (GBTC) to a spot Bitcoin ETF.
On Tuesday, August 29, the court ruled in favor of Grayscale, asking the SEC to review its earlier decision. While the regulator can still deny the firm’s application, the ruling has been hailed as a victory, with experts maintaining that it takes Grayscale one step closer to securing approval for its spot Bitcoin ETF.
At the same time, the SEC is also expected to respond to applications from Bitwise, BlackRock, VanEck, WisdomTree, and Invesco later this week.
On the Flipside
- Despite recent outflows, the net flows from digital asset funds remain positive in 2023 at $265 million.
- The crypto markets have rallied in response to the Grayscale ruling.
Why This Matters
Flows from crypto funds provide a picture of the broad market sentiment. The recent outflows suggest that investors, for now, prefer to remain on the sidelines.
Read this to learn more about the factors affecting the recent crypto market sentiment:
Find out what comes next in the Grayscale case: