Institutional investors are likely to be nervous about crypto following a regulatory crackdown in the United States, with digital asset investment products seeing their biggest weekly inflows in 2023.
On February 20, institutional crypto fund manager CoinShares reported that its digital asset investment product saw a total outflow of $32 million last week, the largest outflow of the year.
This week in Fund Flow, by our Head of Research @jbutterfill :
Digital assets saw outflows of $32m, but rising prices pushed AuM to the highest level since August 2022.
Read the full report – https://t.co/EIXblrOBcL
Get a full view of last week’s crypto trends (1/5) pic.twitter.com/WvJk15WAWs
— CoinShares (@CoinSharesCo) February 20, 2023
The outflow comes after a crackdown on the digital asset industry in the US that has targeted everything from staking services to stablecoins to crypto holdings as the Securities and Exchange Commission ramps up what industry analysts call a war on crypto.
Outflows reached $62 million midway through last week but the slowdown at the end is a good sentiment, added CoinShares analyst James Butterfill.
The majority of these outflows, or 78%, were from Bitcoin (BTC) related investment products and there was an inflow of $3.7 million into Bitcoin short funds. The company blamed regulatory violations for the increased outflows.
“We believe this is because ETP investors are less optimistic about new regulatory pressures in the US relative to the broader market.”
However, the negative sentiment from institutional investors was not mirrored by the broader market which posted a 10% gain for the period. That brought total assets under management for institutional products to $30 million, the highest level since August 2022, Butterfill said.
There were also outflows for Ethereum (ETH) and mixed funds, but the blockchain equity bucked the trend with a total of $9.6 million for the week.
related: Digital asset investment products see highest inflows since July 2022: Report
Institutions began pouring capital back into crypto funds in January with inflows for the last week of the month totaling $117 million, reaching a six-month high.
However, funds have seen an exit in the past two weeks after four weeks of inflows in January.
Regulatory enforcement actions responsible for the change in sentiment include the SEC’s charge against Kraken for staking services on February 9. A few days later he sued Paxos regarding the mining of Binance USD (BUSD), and also proposed changes targeted at the crypto company. operating as a custodian last week.