Digital Asset Funds Face Largest Outflows Since February Amid Policy Uncertainty

In a turbulent week for digital asset investment products, exchange-traded products (ETPs) experienced outflows amounting to $2 billion, marking the largest weekly outflows since February, according to CoinShares. This trend reflects significant investor apprehension driven by uncertainties in monetary policy and selling activities by crypto-native entities.

Policy Uncertainty and Market Reactions

The recent outflows bring the total outflow to $3.2 billion over the last three weeks. The declining confidence in digital assets has seen total assets under management (AuM) in ETPs plummet from an early October peak of $264 billion to $191 billion, a decrease of 27%.

While the outflows were widespread, the United States accounted for a staggering 97% of the outflows, totaling $1.97 billion. Switzerland and Hong Kong followed with outflows of $39.9 million and $12.3 million, respectively. However, Germany emerged as an exception, attracting $13.2 million in inflows as investors there perceived the market dip as a buying opportunity.

Bitcoin and Ethereum Lead the Decline

Bitcoin (BTC) and Ethereum (ETH) were at the forefront of the outflows. Bitcoin saw outflows of $1.38 billion, representing 2% of its total AuM, while Ethereum's outflows of $689 million accounted for 4% of its AuM. Other cryptocurrencies like Solana (SOL) and XRP also faced minor outflows amounting to $8.3 million and $15.5 million, respectively.

Shift Toward Multi-Asset and Short Positions

In response to the volatile market conditions, investors have been diversifying their portfolios. Multi-asset ETPs saw inflows of $69 million over the past three weeks, indicating a preference for diversified exposure. Additionally, there has been a notable increase in short positions on Bitcoin, reflecting a bearish sentiment among investors.

For more detailed insights and analysis, visit the CoinShares blog.