Digital Asset Products Experience $2B Outflows as Market Faces $3.2B Decline

Digital asset investment products have encountered their largest weekly outflows since February, with $2 billion exiting the market last week alone.

Key Takeaways:

Digital asset products experienced $2 billion in weekly outflows, accumulating to $3.2 billion over three weeks.
Analysts attribute the market downturn to uncertainties in monetary policy and significant selling by large crypto investors, often referred to as "whales."
Bitcoin and Ethereum saw the highest levels of withdrawals, while multi-asset funds enjoyed slight inflows.

The recent sell-off marks the third consecutive week of withdrawals, with total outflows during this period amounting to $3.2 billion, as reported by CoinShares on Monday.

This slump follows significant price drops in major cryptocurrencies, which have led to a 27% decrease in total assets managed within digital asset exchange-traded products (ETPs), dropping from an early October peak of $264 billion to $191 billion.

Whale Selling and Fed Uncertainty Drive Crypto Market Drop

Analysts have pointed to the ongoing uncertainty in monetary policy and aggressive selling from large crypto wallets, known as whale wallets, as the key factors behind this market downturn.

The United States accounted for the majority of the outflows, with $1.97 billion leaving U.S.-based products. Switzerland and Hong Kong followed, reporting outflows of $39.9 million and $12.3 million, respectively.

In contrast, Germany stood out as a positive influence, drawing $13.2 million in inflows as local investors viewed the market correction as an opportunity to buy.

Bitcoin products experienced the most significant withdrawals, losing $1.38 billion last week, which represents about 2% of the total Bitcoin ETP assets under management over three weeks. Ethereum faced an even steeper proportional decline, with $689 million in outflows, making up 4% of its ETP market. Smaller assets like Solana and XRP saw minor pullbacks of $8.3 million and $15.5 million.

Despite the prevailing negative sentiment in the market, multi-asset investment products attracted $69 million in inflows over the past three weeks, indicating that some investors are seeking diversification.

Short-Bitcoin ETPs have also gained renewed interest as traders adopt a defensive strategy amid the ongoing market correction.

U.S. Bitcoin ETFs Report $1.1B in Weekly Outflows

Simultaneously, U.S. spot Bitcoin ETFs experienced their third consecutive week of losses, with investors withdrawing $1.1 billion from these products. This marks the fourth-largest weekly outflow in history.

These withdrawals coincided with a notable market correction, leading Bitcoin to drop nearly 10% to around $95,740. This decline raises concerns over the slowing institutional demand for the asset.

Matrixport highlighted that the downturn reflects weakening market momentum, declining ETF inflows, and reduced participation from long-term holders, occurring in a context that lacks immediate macroeconomic catalysts.

The firm has characterized this situation as the beginning of a "mini bear market," suggesting that Bitcoin's next significant move will be influenced by upcoming Federal Reserve policy decisions.

While Bitcoin and Ether ETFs faced challenges, spot Solana ETFs continued to draw investment, securing $12 million in inflows on Friday and marking their 13th consecutive day of inflows since launching on October 29.

Despite this positive momentum, Solana still experienced a 15% decline over the week, and Ether fell by 11%, reflecting widespread weakness across the cryptocurrency markets.