UPDATE - Over $100 million exits US crypto funds in anticipation of potential rate hikes
Institutional investors have now offloaded a total of $101.5 million worth of digital asset productslast week, which looks to be in anticipation of hawkish monetary policy from the U.S. Federal Reserve according to CoinShares.
The reasoning behind this is due to the U.S. inflation rates, which hit 8.6% year-on-year at the end of May, marking a return to levels not seen since 1981. As a result, the market is anticipating that the Feds will take considerable action to control inflation, with some traders pricing in three more 0.5% rate hikes by October and others also expecting a 0.75% hike.
According to the latest edition of CoinShares’ weekly Digital Asset Fund Flows report, the outflows between June 6 and June 10 were primarily led by investors from the Americas at $98 million, while Europe accounted for just $2 million.
What you should know
- Products offering exposure to crypto’s top two assets, Bitcoin (BTC) and Ethereum (ETH), accounted for nearly all outflows at $56.8 million and $40.7 million respectively.
- The month-to-date figures also paint a grim figure at $91.1 million worth of outflows for BTC products and $72.3 million in total outflows for ETH products.
- The report stated, “What has pushed Bitcoin into a ‘crypto winter’ over the last six months can by and large be explained as a direct result of an increasingly hawkish rhetoric from the US Federal Reserve.”
- While CoinShares suggested that Bitcoin has been pushed into a crypto winter, the year-to-date (YTD) inflows for BTC investment products still stand at $450.8 million.
- In comparison, funds offering exposure to ETH have seen hefty YTD outflows of $386.5 million, suggesting the sentiment amongst institutional investors still heavily favours Bitcoin, which has been commonly tagged as digital gold.
- The report also highlighted that the total assets under management (AUM) for Ether funds have “fallen from its peak of US$23bn in November 2021 to US$8.7bn” as of last week
Notably, it appears that the institutional investors offloaded their BTC and ETH products before most of the latest price carnage happened to both assets. According to data from CoinGecko, between June 6 and June 10, the price of BTC and ETH dropped 4.7% and 5.9% each. However, since June 11, BTC and ETH have plunged around 25.7% and 33.2% respectively.
Apart from BTC and ETH outflows, multi-asset funds saw outflows of $4.7 million, and Short Bitcoin products posted minimal outflows of $200,000. At the same time, the report noted that investors also “steered clear of adding to altcoin positions.”
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