Crypto Funds Post Record $423 Million Outflows As Bitcoin Plunge Rattles Market
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Investors piled out of cryptocurrency investment funds at a record pace last week after bitcoin plummeted to its lowest level in 18 months, crypto asset management firm CoinShares reported Monday, highlighting the bearishness that’s come to a head this month as markets grapple with the Federal Reserve’s reversal of pandemic-era stimulus measures.

Key Facts

Cryptocurrency funds posted net outflows of $423 million last week, eclipsing the prior record of $198 million set as crypto markets tumbled in January and bringing total assets down to $36.2 billion, according to a Monday report by CoinShares.

Cash transferred out of bitcoin funds drove the record activity, with net outflows of $453 million—virtually erasing all inflows this year and pushing assets in such funds down to $24.5 billion, the lowest level since the beginning of last year, CoinShares reported.

CoinShares’ James Butterfill notes the selling occured on June 17 (but was reflected in last week’s figures due to trade-reporting lags) and was likely responsible for bitcoin’s steep plunge that weekend, when prices fell below $18,000 as the crypto market grappled with a wave of job cuts, rumors about impending insolvency at major firms and a steep interest rate hike by the U.S. Federal Reserve.

Meanwhile, funds shorting bitcoin saw inflows totaling $15 million in the same week thanks to the launch of ProShares’ Short Bitcoin ETF, which debuted Tuesday and marks the first U.S. fund designed to short the world’s largest cryptocurrency.

Outside of bitcoin, funds invested in other cryptocurrencies saw widespread inflows last week— highlighting the “highly polarized sentiment” among cryptocurrency investors, says Butterfill, with Ethereum funds, for example, picking up $11 million and breaking an 11-week streak of outflows.

By percent of total assets under management, last week’s outflows are the third-largest on record at 1.2%—falling short of a 1.6% decline during the bear market in February 2018.

Key Background

Historically low interest rates and government stimulus measures fueled skyrocketing cryptocurrency prices during the pandemic, but Fed interest rate hikes to curb rising inflation have since battered overall market sentiment. Highlighting industry troubles, popular brokerage Coinbase earlier this month laid off about 18% of employees while the firm’s billionaire CEO, Brian Armstrong, warned investors that a potential recession could lead to a prolonged bear market for cryptocurrencies. The price of bitcoin, at roughly $20,700, has fallen more than 70% from an all-time high of about $69,000 in November.

Surprising Fact

The overall value of the world’s cryptocurrencies has plunged about 70% to $930 billion from an all-time high of about $3 trillion in November. Over the same period, the tech-heavy Nasdaq has plummeted about 28%.

Further Reading

Bitcoin Breaks Back Above $21,000 (Forbes)

Former Crypto Billionaire Insists Bitcoin Will Soar To $250,000 (Forbes)

Coinbase Lays Off 1,100 Employees (Forbes)

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