Cryptocurrencies post record outflows in first week of 2022: CoinShares

The sector has experienced four consecutive weeks of outflows since mid-December, reaching a total of $465 million, or 0.8% of total assets under management.

Bitcoin, the world’s largest cryptocurrency in terms of market capitalisation, posted outflows of $107 million in the week to Jan. 7.

CoinShares investment strategist James Butterfill said the outflows were a “direct response to the FOMC (Federal Open Market Committee) minutes which revealed the US Federal Reserve’s concerns for rising inflation and the fear amongst investors of an interest rate hike.”

A policy tightening by the Fed is a negative factor for risk assets such as cryptocurrencies because of tighter liquidity conditions and increased market volatility.

Over the last four weeks, Coinshares noted there has been greater investor activity than usual.

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Since the start of the year, Bitcoin has shed nearly 10% of its value against the US dollar. On Monday, it fell below $40,000 for the first time since September 2021.

“A phase of heavy loss realization by top buyers has followed the Dec. 4 flush-out (in bitcoin),” said blockchain data provider Glassnode, in its latest research report on Monday.

“In the weeks since, onchain behavior has been more heavily dominated by the HODLer (long-term holders) class, with little activity by newer market entrants,” it added.

Ethereum-based products had outflows of $39 million last week, posting five straight weeks of outflows with a total of $200 million. CoinShares said on a proportional basis, Ethereum’s outflows were 1.4% of total AUM, higher than that of bitcoin.

Blockchain-linked equity investment products did not escape the negative sentiment for the sector, with outflows of $10 million last week.

Assets under management at Grayscale and CoinShares, the world’s two largest digital asset managers, fell from their highs to $38.2 billion and $4.3 billion, respectively.