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Digital Asset Investment Skyrockets with $1.18 Billion Inflows: BTC Leads at $1.16B, ETH Gains $26M, XRP Secures $2.2M

Digital asset investment products attracted US$1.18bn of inflows last week, as the first spot-based Bitcoin ETFs started trading in the US, boosting the demand and liquidity for the crypto market. However, the inflows did not surpass the record of US$1.5bn set in October 2021, when the first futures-based Bitcoin ETFs launched.

According to the Digital Asset Fund Flows Weekly Report by CoinShares, a leading digital asset investment firm, the inflows last week were subject to T+2 settlement, meaning that they reflected the trades executed two days prior. The report also noted that the trading volumes of the exchange-traded products (ETPs) reached US$17.5bn last week, the highest on record, compared to an average of US$2bn per week in 2022. The trading volumes accounted for almost 90% of the daily trading volumes on trusted exchanges last Friday, indicating a high level of interest and activity in the crypto ETPs.

The US was the main driver of the inflows, as it saw US$1.24bn of inflows last week, following the approval and listing of the first spot-based Bitcoin ETFs by ProShares and Valkyrie. These ETFs allow investors to gain exposure to the price of Bitcoin without having to buy or store the underlying asset, thus lowering the barriers and risks of entry. The US also has several futures-based Bitcoin ETFs, which track the price of Bitcoin futures contracts, but these tend to have higher fees and lower returns than the spot-based ETFs.

Meanwhile, some regions saw minor outflows, such as Canada (US$44m), Germany (US$27m), and Sweden (US$16m). CoinShares speculated that these outflows were due to basis traders, who arbitrage the price differences between the spot and futures markets, switching from Europe to the US. Switzerland was the only European country that saw inflows, totalling US$21m last week.

Among the different digital assets, Bitcoin was the clear winner, as it received US$1.16bn of inflows last week, representing a significant 3% of its total assets under management (AuM). Bitcoin also reached a new all-time high of over US$69,000 last week, amid the bullish sentiment and momentum in the crypto market. Short-bitcoin, a product that allows investors to bet against the price of Bitcoin, also saw minor inflows of US$4.1m last week.

Other digital assets saw relatively modest inflows, such as Ethereum (US$26m) and XRP (US$2.2m). Solana, a fast-growing blockchain platform that competes with Ethereum, saw only US$0.5m of inflows last week, despite its strong performance and popularity in the crypto space.

Blockchain equities, which are stocks of companies that are involved in the blockchain and crypto industry, also saw large inflows of US$98m last week, bringing the total inflows over the last seven weeks to US$608m. This suggests that investors are also interested in the broader ecosystem and innovation of the blockchain and crypto sector, beyond the digital assets themselves.

The report concluded that the inflows last week were a positive sign for the crypto market, as they indicated a growing adoption and acceptance of the digital assets by the mainstream investors and regulators. However, the report also cautioned that the crypto market remains volatile and uncertain, and that investors should be aware of the risks and opportunities involved.

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