The latest data on cryptocurrency asset flows indicates a recurring trend of outflows, totaling $107 million for the week ending August 4. This continuation of negative movement, which has persisted for the past three weeks, now amounts to a cumulative outflow of $134.8 million. The primary contributor to this trend is Bitcoin (BTC), with outflows reaching $111 million, outweighing the inflows during the same period.
As outlined in CoinShares’ “Digital Asset Fund Flows” weekly report, the prevalence of outflows from Bitcoin funds reveals a widespread inclination towards “profit taking” following the substantial gains experienced in the previous market cycle. During the month preceding the recent outflow trend, there were inflows of $742 million into cryptocurrency funds, with an overwhelming 99% attributed to Bitcoin. This concentration of outflows in Bitcoin indicates a cautious approach by investors and a preference to secure profits.
The report also highlights a dip in trading volumes for investment products, falling below the year-to-date average. On-exchange market volumes have decreased by 62% compared to the relative average, suggesting reduced activity and engagement in cryptocurrency trading.
Regional Disparities in Inflows and Outflows
With regards to regional trends, only Australia and the United States witnessed inflows during this period, amounting to $0.3 million and $0.2 million, respectively. Conversely, Canada experienced the largest outflow, totaling $70.8 million, followed by Germany with $28.5 million of outflows.
Solana and XRP Buck the Trend
Despite the outflows from Bitcoin, the overall weekly total was partially offset by inflows into Solana (SOL), amounting to $9.5 million, a significant increase from the previous week’s $0.6 million. Investment products linked to XRP (XRP) also experienced inflows of $0.5 million. However, Ether (ETH) funds continue to exhibit a negative trend, with outflows reaching $5.9 million, surpassing the previous week’s outflows of $1.9 million. This further amplifies the divergence between Ether and Solana, as the latter continues to demonstrate a bullish trend.
While Bitcoin has maintained its position with a positive performance for the year since its opening in January, the market has remained relatively stagnant, with the price remaining mostly below $30,000 since April. Many experts attribute this perceived sideways movement to prevailing market uncertainty. A study by Switzerland-based investment adviser 21e6 Capital AG reveals that Bitcoin “hodlers” have outperformed crypto funds by 69% in the first half of 2023. This data suggests that cautious investors may have opted to increase their cash holdings as a safeguard against regulatory and legal uncertainties surrounding numerous exchanges, including the 2022 implosion of FTX. However, there are indications that investor sentiment is slightly improving compared to the first half of 2023.
The ongoing outflows from cryptocurrency funds, primarily led by Bitcoin, highlight a prevalent trend of profit taking among investors. The decline in trading volumes further indicates reduced activity in the market. Regional disparities in inflows and outflows demonstrate varying levels of engagement and investor confidence. While Solana and XRP experience inflows, Ether continues on a negative trajectory. The cautious sentiment of investors, influenced by market uncertainty and regulatory concerns, has likely contributed to the recent outflows. However, it is worth noting the slight improvement in investor sentiment compared to the earlier part of the year.