Digital asset investment products have experienced their largest weekly outflows since February, with investors pulling $2 billion from crypto exchange-traded products (ETPs). According to a report by CoinShares, these outflows mark the third consecutive week of withdrawals, bringing the total sell-off to $3.2 billion. This sharp correction has caused total assets under management (AUM) in digital asset ETPs to plummet by 27%, from an early October peak of $264 billion to the current $191 billion.
The primary drivers behind this significant outflow are uncertainty surrounding monetary policy and large-scale selling by crypto-native whales. The Federal Reserve's hawkish stance, with its resistance to interest rate cuts and focus on controlling inflation, has unsettled investors. This has led to a broad risk-off shift, prompting ETP investors to reduce their exposure to Bitcoin, Ethereum, and other high-beta crypto assets.
The United States accounted for the vast majority of the outflows, with $1.97 billion leaving US-listed ETPs last week, representing 97% of all global outflows. In contrast, Germany bucked the trend, attracting $13.2 million in inflows as investors saw the dip as a buying opportunity. Switzerland and Hong Kong also experienced outflows, with $39.9 million and $12.3 million respectively.
Bitcoin-focused investment products experienced the most significant outflows, with $1.38 billion leaving these products. This represents approximately 2% of the total Bitcoin ETP assets under management over the three-week period. Ethereum products also saw substantial redemptions, with $689 million in outflows, equivalent to around 4% of assets under management. Other altcoins, including XRP and Solana, experienced more modest withdrawals of $15.5 million and $8.3 million, respectively.
Despite the overall negative sentiment, investors have shown some interest in multi-asset ETPs, allocating $69 million into these products over the past three weeks. This suggests a preference for diversified exposure amid the ongoing market volatility. Short-Bitcoin ETPs have also attracted renewed interest, as traders seek protection against further price declines.
The recent outflows and market correction highlight the sensitivity of digital asset investments to macroeconomic factors and investor sentiment. As uncertainty surrounding monetary policy persists, and with large crypto holders potentially continuing to sell, the near-term outlook for crypto ETPs remains uncertain. The industry is focused on stabilizing supply chains and proving the value of blockchain technology in a volatile environment. The future direction of the market may depend on greater macroeconomic certainty.
