US regulatory crackdown leads to $32M digital asset outflows: CoinShares

Institutional investors may be nervous about cryptocurrencies following a regulatory crackdown in the US, with digital asset investment products seeing their biggest weekly outflow in 2023.

CoinShares, an institutional crypto fund manager, on February 20 report Its digital asset investment products saw a total outflow of $32 million last week, the largest outflow of the year.

In this week’s fund flow, according to the head of research @jbutterfill :

Despite US$32 million outflow from digital assets, rising prices have pushed AuM to its highest level since August 2022.

Read the full report – https://t.co/EIXblrOBcL

Get a Comprehensive View of Last Week’s Crypto Flow (1/5) pic.twitter.com/WvJk15WAWs

CoinShares (@CoinSharesCo) February 20, 2023

The exodus marks the U.S. digital escalation, targeting everything from staking services to stablecoins to cryptocurrency custody, as the Securities and Exchange Commission intensifies what industry analysts are calling the war on cryptocurrencies. It came after a massive crackdown on the property industry.

According to CoinShares analyst James Butterfill, the outflow reached $62 million in the middle of last week, but slowed by the end of it as sentiment improved.

The majority, or 78%, of these outflows came from Bitcoin (BTC)-related investment products, with $3.7 million inflows into Bitcoin short funds. The company blamed the regulatory crackdown on the increase in spills.

We believe this is because ETP investors are less optimistic about recent US regulatory pressures compared to the broader market.

However, the negative sentiment from institutional investors was not reflected in the broader market, which saw a 10% gain over the period. That pushed total institutional assets under management to his $30 million, the highest level since August 2022, Butterfill said.

Despite outflows of Ethereum (ETH) and mixed-asset funds, blockchain stocks bucked the trend with a total inflow of $9.6 million that week.

Related: Digital Asset Investment Products See Highest Inflows Since July 2022: Report

Institutional investors began pouring capital into crypto funds in January, with inflows totaling $117 million in the final week of the month, reaching a six-month high.

However, following four weeks of inflows in January, the past two weeks have seen outflows.

Regulatory enforcement actions that have caused the sentiment shift include the SEC indictment against the staking service on Feb. 9, which acted as a custodian last week.