The crypto market experienced a drastic change on record, with digital asset investment product outflows of $415 million, marking the end of its 19-week consecutive trend of inflows.
This post-U.S. election inflow accumulated $29.4 billion, surpassing the $16 billion recorded in the first 19 weeks of US spot ETF launches. Bitcoin outflows were dominated by $430 million, CoinShares stated.
The change comes after the Fed’s hawkish statements combined with better-than-expected reports on inflation.
The recent outflows mark a shift after a 19-week spell of influx, where cryptocurrency investing products had gained $29.4 billion after the U.S. elections. The era of hope is from spot ETF launches along with political changes early in 2024.
Bitcoin Leads the Sell-Off as Investor Sentiment Shifts
Recent outflows of crypto ETPs totaled $415 million, led by Bitcoin at $430 million. The shifts were partly nullified by flows into altcoin products like Solana ($8.9 million) and XRP ($8.5 million).
The majority of withdrawals are in the U.S. market, totaling $464 million, while European markets were doing well with flows into Germany ($21 million), Switzerland (12.5 million), and Canada (10.2 million).
It’s important to note that there are no corresponding flows into short-Bitcoin products, which indicates that investors are pulling capital rather than hedging out of lower levels expected by them.
Macroeconomic Factors Behind the Shift
The recent outflows of cryptocurrency ETPs are driven by Fed sentiment and fear of inflation. The Fed’s signs of tighter monetary conditions have led to investor caution, affecting the demand for riskier assets like cryptocurrency.
The trend reverses earlier strong flows of 2024, partly driven by spot Bitcoin ETF listings in January 2024. It gives a boost to investor sentiment but now challenges overall economic conditions.
The absence of flows into short-Bitcoin products implies that money is being taken out rather than hedging against drops. The majority of outflows are from the US market. The trend is reflective of how external economic conditions can have far-reaching effects on crypto markets and investor sentiment.
READ MORE: Standard Chartered, Animoca, and HKT Unite To Create Hong Kong Stablecoin
