Record $1.7B Crypto ETP Outflows Spark Market Jitters: Longest Streak Since 2015

A seismic shift is underway in the cryptocurrency investment landscape as exchange-traded products (ETPs) experience a historic exodus. Recent data reveals a staggering $1.7 billion in Crypto ETP Outflows, marking the fifth consecutive week of net withdrawals. This unprecedented negative trend signifies the longest outflow streak since CoinShares began tracking these metrics in 2015, sending ripples of concern through the digital asset market.

Unpacking the Record Crypto ETP Outflows: A Deep Dive into the Data

The latest CoinShares report highlights a concerning acceleration in liquidation activity. After a week of relatively softened outflows at $876 million, the past trading week witnessed a sharp surge, pushing the total five-week outflow figure to a massive $6.4 billion. This relentless selling pressure has resulted in a continuous 17-day streak of negative flows, a grim milestone that underscores a significant shift in market sentiment surrounding crypto Investment Products. Despite this overwhelming negative trend, it’s worth noting that year-to-date inflows remain marginally positive at $912 million, offering a faint glimmer of resilience amidst the storm.

Bitcoin ETPs Bear the Brunt of Outflows

Leading the charge in this outflow wave are Bitcoin ETPs, which have experienced the lion’s share of liquidations. Following $756 million in outflows in the first week of March, selling pressure intensified dramatically. Between March 10th and 14th, Bitcoin ETPs suffered a further $978 million in outflows. This relentless selling spree has brought the total Bitcoin ETP outflows over the past five weeks to a colossal $5.4 billion. Consequently, year-to-date inflows for Bitcoin ETPs have dwindled to a mere $612 million by March 14th, highlighting the severity of the current downturn.

Flows by asset (in millions of US dollars). Source: CoinShares

While Bitcoin ETPs are experiencing the most significant outflows, other digital assets are not immune. Ether (ETH) ETPs have seen $175 million in outflows, and Solana (SOL) ETPs experienced $2.2 million in liquidations. Interestingly, XRP (XRP) ETPs are bucking the trend, continuing to attract inflows, with a further $1.8 million added, suggesting pockets of optimism within the broader market.

Regional and Issuer Breakdown: Who is Selling Off?

Analyzing the geographical distribution of these outflows reveals that while Europe is experiencing substantial selling, the United States is leading the pack. European crypto ETP provider 21Shares recorded the largest outflows among issuers last week, totaling $534 million. However, the United States witnessed even more significant liquidations, with a staggering $1.2 billion exiting its crypto ETP market, according to the CoinShares Report.

Flows by issuer (in millions of US dollars). Source: CoinShares

Even BlackRock, a major player and significant crypto holder among issuers, is experiencing the outflow pressure, with $401 million leaving their ETPs last week and month-to-date outflows expanding to $594 million. In contrast, ProShares stands out as a notable exception. It is the only major tracked issuer still recording inflows month-to-date, with $2 million added. ProShares is also among the few major issuers, including BlackRock and ARK Invest, that have managed to maintain positive year-to-date inflows as of March 14th, highlighting their relative resilience in the face of widespread selling. Adding another layer to the narrative, Binance experienced a near wipeout of its assets under management due to a seed investor exit, leaving a mere $15 million remaining.

What Does This Mean for the Crypto Market?

The record Crypto ETP Outflows signal a significant shift in investor sentiment and potentially broader market dynamics. Several factors could be contributing to this exodus from crypto Investment Products:

• Profit Taking: Following a period of significant crypto market gains, some investors may be locking in profits, leading to outflows from ETPs.
• Risk Aversion: Macroeconomic uncertainties, regulatory concerns, or broader market volatility could be driving investors to reduce their exposure to riskier assets like cryptocurrencies.
• Alternative Investments: Investors might be reallocating capital to other asset classes offering more appealing risk-adjusted returns in the current environment.
• ETF Competition: The evolving landscape of crypto investment vehicles, including spot Bitcoin ETFs in some regions, might be influencing flows in and out of ETPs.

While the $1.7 billion outflow figure and the 17-day negative streak are undoubtedly concerning, it’s crucial to maintain perspective. Year-to-date inflows are still positive, and market sentiment can be highly dynamic. However, the current trend warrants close monitoring. Will this outflow streak continue, or is this a temporary correction before renewed inflows return? The coming weeks will be critical in determining the trajectory of crypto ETP flows and their impact on the broader digital asset market.

Key Takeaways on Crypto ETP Outflows:

• Record Outflows: Crypto ETPs experienced a record $1.7 billion outflow last week, marking the longest negative streak since 2015.
• Bitcoin Dominance in Outflows: Bitcoin ETPs are the primary driver of the outflows, accounting for $5.4 billion in the past five weeks.
• Geographical Divide: The US is experiencing the largest outflows, followed by Europe.
• Issuer Variance: 21Shares and BlackRock are seeing significant outflows, while ProShares is an outlier with continued inflows.
• Market Sentiment Shift: The outflows indicate a potential shift in market sentiment, possibly driven by profit-taking, risk aversion, or macroeconomic factors.

The crypto market is known for its volatility and rapid shifts in sentiment. While the current Crypto ETP Outflows are a noteworthy development, the long-term implications remain to be seen. Investors should closely monitor market dynamics, regulatory developments, and macroeconomic factors to navigate this evolving landscape effectively. The resilience of the crypto market will be tested, and the coming weeks will provide valuable insights into its ability to weather this storm and potentially rebound.