Digital Asset Funds See $32M Outflows Amid US Crypto Crackdown
Digital asset mutual funds saw $32 million in net outflows last week amid a flurry of aggressive regulatory action by the US government.
According to a recent report from CoinShares, $32 million in payouts marks the largest withdrawal from crypto funds since the end of December 2022.
It is worth noting that outflows reached a record $62 million by midweek. However, more came in as sentiment improved towards the end of the week and crypto prices resumed their upward trend.
“The negative sentiment among ETP investors was not reflected in the broader market with Bitcoin prices rising 10% on the week,” the report said, adding that the rally sent total assets under management (AuM) to 30 billion dollars, their highest level since August 2022.
Bitcoin-linked mutual funds witnessed the largest number of withdrawals, seeing nearly $25 million in outflows. On the other hand, short-bitcoin investment products had inflows of $3.7 million, with inflows YTD totaling $38 million.
Bitcoin funds saw an inflow of $116 million in the last week of January as the flagship cryptocurrency managed to hold onto its gains. So far this year, Bitcoin products have had a net inflow of $158 million, becoming the biggest gainer of the year.
Meanwhile, other major altcoins such as Ethereum, Cosmos, Polygon and Avalanche saw outflows of $7.2 million, $1.6 million, $0.8 million and $0.5 million respectively. On the other hand, Aave, Fantom, XRP, BNB and Decentraland all saw smaller inflows from $0.36 million to $0.26 million.
“Blockchain stocks saw inflows totaling US$9.6 million last week and have seen six consecutive weeks of inflows highlighting a more constructive sentiment among investors,” the report said.
In terms of geography, Germany and Canada accounted for the bulk of the negative sentiment last week, pulling out $23.1 million and $10.6 million, respectively. On the flip side, the only notable inflows were seen in Switzerland at $4.9 million.
US crackdown on crypto intensifies
According to CoinShares, the outflows are attributed to increasing regulatory pressure in the US “We believe this is due to ETP investors being less optimistic about the latest regulatory pressure in the US relative to the broader market,” the report said.
Last week, the New York Department of Financial Services (DFS) ordered Paxos, a crypto firm that issues Binance’s stablecoin Binance USD (BUSD), to stop minting BUSD. Subsequently, it was revealed that the SEC plans to sue the company over the BUSD issuance. The agency argued that BUSD is considered an unregistered security.
The SEC also reached an agreement with crypto exchange Kraken to stop offering staking services or programs to customers in the country and pay $30 million to settle allegations that it failed to “register the offering and sale of its cryptoasset staking-as-a-service- program,” which the commission qualified as securities.
