CoinShares’ Butterfill suggests ‘continued hesitancy’ among investors

Lower inflows of digital asset investment products in recent weeks suggest a “continued hesitancy” toward crypto among institutional investors amid a slowing U.S. economy.

In the latest edition of CoinShares’ weekly “Digital Asset Fund Flows” report, Coinshares head of research James Butterfill highlighted the distant institutional sentiment towards crypto investment products, which saw “minor entries” for the third week in a row.

“Flows remain low, implying continued hesitancy among investors, as evidenced by investment product trading volumes of $886 million for the week, the lowest from October 2020”.

Between September 26 and September 30, investment products offering exposure to Bitcoin (BTC) saw the most inflows with just $7.7 million, and Ether investment products ( ETH) came close with $5.6 million in entry. BTC shorts accounted for the only other notable inflows of $2.1 million.

These inflows were offset by outflows of more than $3.5 million for investment products that offered exposure to altcoins such as Polygon (MATIC), Avalanche, and Cardano (ADA), while multi-asset funds and Solana also lost $700,000 and $400,000 this week.

Commenting on the current state of the crypto market and institutional outlook recently, Markus Thielen, head of research and strategy at Singapore-based crypto financial services platform Matrixport, noted that:

“The market is currently in a wait-and-see environment, while a possible positive shift after the US mid-term elections could have significant regulatory changes.”

“U.S. economic data last night, particularly the ISM index, showed that growth has slowed materially in the U.S. economy and there is now a chance that the Fed will become less brutal. The USD rally seems to have lost one of its key drivers and this could signal a pause in rate hikes. This could be very bullish for digital assets later in the year,” he added.

Looking at monthly flows (MTD) since September 30, ETH products have been the most downloaded by institutional investors, despite the merger taking place on September 15, with outflows of $65.1 million .

“Looking back, the merger was not good for sentiment with outflows of $65 million in September. Increased regulatory scrutiny and a strong US dollar are the likely culprits as the switch to Proof of Stake was successfully executed,” Butterfill said.

In contrast, Short BTC funds and BTC investment products saw smaller inflows of $15.2 million and $3.2 million MTD.

Crypto ETF Outflows Decline

While there has been limited recent action for crypto investment products tracked by CoinShares, Bloomberg Intelligence has noted a notable trend in crypto exchange-traded funds (ETFs).

Related: A crumbling stock market could create profitable opportunities for Bitcoin traders

According to data from Bloomberg Intelligence, institutional investors unloaded $17.6 billion from crypto ETFs in the third quarter of 2022, which offers a stark contrast to the “record $683.4 million withdrawn from these funds ” in the second quarter of 2022.

“The outflows have mostly occurred in the past two months. In July, investors poured more than $200 million into crypto ETFs,” Bloomberg noted in a Sept. 30 article, adding that the decline in The exits were likely due to “narrow fluctuations” in cryptocurrency prices during the third quarter.