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The rollercoaster ride continues for crypto investment funds as the latest data from CoinShares shows a second consecutive week of heavy outflows.
Digital asset investment products recorded net outflows of $584 million last week, bringing the two-week exodus to a staggering $1.2 billion. The strong reversal occurs after a record entry of US$ 2 billion in May, highlighting the volatile and sentiment-driven nature of the crypto fund space.
So what’s behind the sudden shift in investor sentiment? According to CoinShares, it’s all about interest rates. The recent outflows “are a reaction to pessimism among investors regarding the prospect of interest rate cuts by the Fed this year,” the report notes.
O dampening hopes of a Fed pivot took the wind out of Bitcoin’s sails, with the largest cryptocurrency bearing the brunt of the outflows. Bitcoin funds recorded net outflows of $630 million last week, accounting for the majority of overall redemptions.
Interestingly, despite the sour sentiment, investors are in no rush to bet against Bitcoin. Bitcoin short funds, which profit when the price of BTC falls, actually saw modest outflows of $1.2 million, suggesting bearish speculators are on the sidelines for now.
Ethereum, the second-largest cryptocurrency, also felt the impact of the risk-on climate, with ETH funds recording $58 million in outflows. However, some altcoins managed to buck the trend, with Solana, Litecoin and Polygon funds attracting small but notable inflows.
Multi-asset products, which invest in baskets of cryptocurrencies, saw strong inflows of $98 million, indicating that some investors see the recent weakness in altcoins as a buying opportunity.
From a regional perspective, the US led outflows with $475 million in redemptions, while Canada also recorded significant outflows of $109 million. Germany and Hong Kong recorded more modest outflows, while Switzerland and Brazil were the only positive points, with inflows of US$39 million and US$48.5 million, respectively.
The latest data on fund flows comes amid a broader cooldown in the crypto ETP space. Last week saw the lowest global ETP volumes since the launch of US Bitcoin ETFs in January, with just $6.9 billion traded.
Unstable fund flows and falling volumes suggest the crypto market is dealing with a crisis of confidence as investors reassess their expectations regarding monetary policy and global growth. While the long-term bullish outlook for Bitcoin and crypto remains intact, the road ahead is likely to be bumpy.
Edited by Stacy Elliott.
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