Digital Asset Funds Reach US$53bn in Assets as Investors Pour US$708m in One Week

Digital asset investment products attracted a record US$708m of inflows last week, as investors flocked to the newly launched bitcoin exchange-traded funds (ETFs) in the US. According to the latest report by CoinShares, a digital asset research and investment firm, the year-to-date inflows for digital asset funds reached US$1.6bn, with total global assets under management hitting US$53bn.

The report also revealed that trading volumes in exchange-traded products (ETPs) dropped to US$8.2bn from US$10.6bn in the previous week, but still remained well above the US$1.5bn weekly average in 2023. These volumes accounted for 29% of bitcoin’s total trading on trusted exchanges, indicating a high demand for regulated and transparent exposure to the leading cryptocurrency.

The US market was the main driver of the inflows, as the launch of the first bitcoin futures ETFs in mid-January sparked a surge of interest from both retail and institutional investors. The new ETFs, which track the price of bitcoin futures contracts rather than the spot price, saw US$1.7bn of inflows last week, bringing the total since inception to US$7.7bn. The new ETFs have averaged US$1.9bn of inflows over the last four weeks, surpassing the expectations of many analysts and observers.

However, the success of the new ETFs came at the expense of the incumbent issuers, such as Grayscale, which saw US$6bn of outflows since the start of the year. Grayscale, which operates the largest and oldest bitcoin trust in the world, has been facing pressure from investors to convert its product into an ETF, as its shares trade at a significant discount to the net asset value. The report noted that the outflows from Grayscale have slowed down in recent weeks, suggesting that some investors may be holding on to their shares in anticipation of a possible conversion.

Bitcoin was the dominant asset class in terms of inflows, capturing 99% of the total last week. Bitcoin funds saw US$703m of inflows, as the price of the cryptocurrency rebounded from a brief dip below US$30,000 to above US$40,000. Short-bitcoin products, which allow investors to bet against the price of bitcoin, saw minor outflows of US$5.3m, reflecting a change in sentiment among traders.

Source: CoinShares

Other digital assets saw mixed results, with Solana being the only one to record significant inflows of US$13m. Solana, a fast and scalable blockchain platform, has been gaining popularity among developers and users, as it offers low fees and high throughput. Ethereum and Avalanche, two other smart contract platforms, saw outflows of US$6.4m and US$1.3m respectively, as they faced competition from Solana and other rivals.

Blockchain equities, which include companies that are involved in the digital asset industry, saw US$147m of outflows from one issuer last week, but this was offset by US$11m of inflows from other issuers. Blockchain equities have been performing well in the stock market, as they benefit from the growth and innovation in the crypto space.

The report concluded that the digital asset fund flows reflect the increasing adoption and acceptance of cryptocurrencies and blockchain technology, as well as the diversification of investor preferences and strategies. The report also stated that the outlook for the sector remains positive, as more regulatory clarity and innovation are expected in the near future.

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