Dramatic Outflows in Digital Asset Funds Signal Early Stage of Institutional Adoption
Summary:
Last week, digital currency traded funds and products saw a major outflow of $600 million, with Bitcoin investments experiencing a significant portion of these outflows. Altcoins experienced modest inflows but couldn't stem the overall tide. Experts suggest that despite the hype of Bitcoin ETFs in the U.S., corporate adoption is in its infancy with a predicted second wave of strong institutional interest yet to arrive.
Last week digital currency traded funds and products witnessed an outflow of $600 million, the most extensive since March 22, 2024, according to a report released on June 17th. The CoinShares Weekly Asset Fund Flows report indicates that the primary reason for this outflow was withdrawals from Bitcoin (BTC) investments, which saw a weekly outflow of $621 million. In contrast, Bitcoin short funds experienced a weekly inflow of $1.8 million. The report postulates that elevated interest rates sustained by the Federal Reserve possibly triggered this capital withdrawal from fixed-supply assets like Bitcoin.
Alternate cryptocurrencies, or altcoins, generally achieved decent performance last week, with Ether (ETH) investments recording an inflow of $13.2 million, while LIDO and XRP (XRP) products netted inflows of $2 million and $1.1 million respectively. There were also small weekly inflows into BNB (BNB), Litecoin (LTC), Cardano (ADA), and Chainlink (LINK) investment products. However, these altcoin inflows did little to counter the outflows and selling leading to a decline in total digital assets under management from $100 billion to $94 billion for the week.
Bitcoin ETFs have not achieved broad institutional acceptance despite the initial excitement surrounding their introduction in the U.S. Marc Degen, co-founder of blockchain company Trust Square, recently suggested corporate adoption of Bitcoin is still in an early or "amateur league" phase. He pointed to the inflows into Bitcoin ETFs, which have accumulated between $60 billion-$70 billion so far, with total global assets under management reaching $100 billion earlier in June.
To put this into context, Degen compared inflows into digital assets funds with the capital flows into JPMorgan. In 2023, the banking major gained $489 billion in new client funds - a larger volume of inflows in one year than the total accumulated by the entire Bitcoin investment fund industry through its combined ETF, ETP and asset trust ventures.
Franklin Templeton CEO Jenny Johnson echoed this view, noting that institutional adoption is still in its nascent stage and a second wave of investment characterized by strong institutional interest and substantial capital influx is yet to come.
Published At
6/17/2024 11:30:00 PM
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