Crypto funds lose $142 million, as money flows out after US Fed statements spook investors

Crypto asset funds including bitcoin and ethereum recorded the largest weekly outflow in four months, totalling $142 million for the week ending December 17.

Goldman Sachs said that bitcoin currently has 20% share of "store of value" market citing it's $700 billion market capitalization, compared to the around $2.6 trillion worth of gold owned as an investment.(File photo; Reuters)

Crypto asset funds including bitcoin and ethereum recorded the largest weekly outflow in four months, totalling $142 million for the week ending December 17, as investors shied away from risk assets in view of the US Fed statements, CoinShares said in a note. Crypto fund outflows may continue into the next year on fears of rising interest rates, James Butterfill, investment strategist at CoinShares, said. “I suspect we could see further outflows in 2022 at certain points due to the threat of rate rises and all the uncertainty that brings, particularly after 10 years of QE (quantitative easing),” CoinShares report author James Butterfill told Financial Express Online.

Crypto funds reverse flows

The latest weekly outflows in crypto funds reverses a four-month long run of inflows. “It comes at a time where there have been considerable outflows across all risk assets following the recent US Federal Reserve statement on tapering,” the CoinShares report said. This comes as Bitcoin shed a fifth of its value triggered by macroeconomic concerns on December 4, with its value falling as low as $41,967.5 during the session, according to a report from Reuters.

Bitcoin sees most outflows

Bitcoin, which is the largest cryptocurrency in terms of market capitalisation, witnessed the biggest blow, with an outflow of $89.2 million. Ethereum followed suit and recorded outflow of $63.6 million in funds. Though the fund outflow was largest in 17-weeks, the asset manager noted that outflow was relatively small when compared with outflows in early 2018. While the major cryptocurrencies suffered a blow, other altcoins such as solana and polkadot softened the impact seeing in flows totaling $6.7million and $2.5 million.

Source: Bloomberg, CoinShares data

Yearly flows still in green

Despite the record low weekly outflow, overall funds flow has been in the green zone this year, the data from CoinShares showed. Year-to-date, digital asset investment products funds accounted for fund flow of $9.4 billion with bitcoin alone amassing about $6.4 billion funds.

Further, James Butterfill expects 2022 to be a year of net inflows in crypto funds, despite patches of outflows. “… ultimately, bitcoin being immutable and an asset of fixed supply, will be seen very favourably as QE unwinds,” James Butterfill said. “Consequently, we are likely to see considerably more inflows than outflows in 2022,” he added.

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