Crypto outflows surge after US regulatory crackdown, CoinShares says
The crypto space is experiencing growing tension as US regulators intensify their regulatory approaches. Some of their recent enforcement actions include a stop order mandate for crypto token issuers, a Wells notice to some exchanges, a smattering of lawsuits, and others.
The heat from the crypto breakout is gradually creating fear among institutional investors. A recent report from CoinShares reveals that massive investments in digital assets are flowing out of the industry.
Total outflows of crypto to the highest of the year
In accordance Coin shares, an institutional crypto fund manager, outflows of digital assets hit the highest record for the year last week. The report indicated $32 million in cumulative outflows from digital asset investment products.
According to the report, digital asset outflows totaled $62 million by the middle of last week. But on Friday, about $30 million inflows came due to a slight change in market sentiment that brought outflows down to $32 million.
Bitcoin suffered the most with the rising negative sentiment in the digital space. Outflows for the primary digital assets were around $25 million, accounting for nearly 78% of the total outflow. However, short Bitcoin investment products recorded a total inflow of $3.7 million during the period. It witnessed a major YTD (Year-To-Date) inflow totaling $38 million.
As for altcoins, the negative sentiment reflected a mixed performance. While some tokens witnessed an overall outflow for the week, some saw more inflows from investors.
Ethereum, Avalanche, Polygon and Cosmos recorded outflows of $7.2 million, $0.5 million, $0.8 million and $1.6 million respectively. But BNB, Ripple (XRP), Fantom and Aave recorded weekly inflows ranging from $0.36 million to $0.26 million.
Since the beginning of 2023, investors have been more enthusiastic about digital investments. The entry for the last week of January was $117 million, reaching a 6-month high. However, a shift in market sentiment led to a decline as more funds continued to move out of the industry over the past two weeks.
In its report, CoinShares noted that the negative sentiment among institutional investors did not spread to the broader crypto market. Overall market prices rose by around 10% during the week. This change triggered an increase in total assets under management (AUM) as the value reached $30 billion, which represented the peak since August 2022.
US regulatory crackdown on digital assets
The crypto industry is witnessing these massive outflows due to the US regulatory crackdown on digital assets. The US watchdogs have focused on various aspects of transactions involving crypto-tokens. These include stablecoins, stake programs, services, crypto depository, etc.
The US Securities and Exchange Commission (SEC) is among the regulators cracking down on the crypto industry with stricter enforcement measures. On February 9, the regulator became punished The Kraken crypto exchange after stopping its staking services.
That too Narrow Paxos with a lawsuit regarding the issuance of Binance USD (BUSD) stablecoin. Some industry analysts believe that the SEC is waging a war on crypto due to its recent approach to regulation.
Featured image from Pexels and chart from TradingView.com
