US Regulators Crackdown Leads to $32M Digital Asset Outflows: CoinShares
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Institutional investors may have gotten the jitters about crypto amid regulatory crackdowns in the United States, with digital asset investment products seeing the largest weekly outflow of 2023.
On Feb. 20, institutional crypto fund manager CoinShares reported that digital asset investment products saw outflows totaling $32 million last week, the largest outflow of the year.
This week in Fund Flows, from our Head of Research @jbutterfill :
Digital assets see outflows of $32 million, but rising prices push AuM to highest levels since August 2022.
Read the full report – https://t.co/EIXblrOBcL
Get a comprehensive look at crypto flows over the past week (1/5) pic.twitter.com/WvJk15WAWs
— CoinShares (@CoinSharesCo) February 20, 2023
The outflow comes amid a massive crackdown on the digital asset industry in the US, targeting everything from staking services to stablecoins to crypto custody, while the Securities and Exchange Commission steps up what industry analysts are waging their war on call against crypto.
Outflows hit $62 million in the middle of last week but slowed towards the end as sentiment improved, CoinShares analyst James Butterfill added.
The majority of these outflows, or 78%, came from Bitcoin (BTC) related investment products, and there was a $3.7 million inflow into Bitcoin short funds. The firm blamed regulatory crackdowns for the increased outflows.
“We believe this is due to ETP investors being less optimistic about recent regulatory pressures in the US relative to the broader market.”
However, negative sentiment from institutional investors was not reflected in the broader markets, which were up 10% over the period. This brought total assets under management for institutional products to $30 million, the highest since August 2022, Butterfill noted.
There were also outflows for Ethereum (ETH) and mutual 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 pumping capital back into crypto funds in January, with inflows totaling $117 million in the last week of the month, hitting a six-month high.
However, after four weeks of inflows in January, the funds have seen outflows in the last two weeks.
Regulatory enforcement actions responsible for the shift in sentiment include the SEC indicting Kraken on February 9 for its staking services. A few days later, she sued Paxos over Binance USD (BUSD) minting and also proposed changes targeting crypto firms administrated last week.
