US$500m Outflows Hit Global Digital Asset Products, Grayscale Outflows Lessen: CoinShares

The global market for digital asset investment products witnessed another week of significant outflows, totalling US$500m, according to the latest report by CoinShares, a leading provider of digital asset data and research. The report, published on 29 January 2024, covers the period from 22 to 28 January 2024 and provides insights into the trends and flows of digital asset investment products across various regions and platforms.

The report reveals that the outflows were mainly concentrated in the US, Switzerland and Germany, which accounted for US$409m, US$60m and US$32m of the total outflows respectively. These regions have been experiencing consistent outflows since the launch of the first US exchange-traded funds (ETFs) that track the performance of Bitcoin and other digital assets on 11 January 2024.

The US ETFs, which offer lower fees, higher liquidity and greater regulatory clarity than the existing investment products, have attracted US$5.94bn of inflows since their inception, with US$1.8bn coming in the last week alone. The report suggests that the popularity of the US ETFs has led to a shift of capital from the incumbent investment product issuer, Grayscale, which has seen US$5bn of outflows since 11 January 2024, including US$2.2bn in the last week.

Source: CoinShares

However, the report also indicates that the outflows from Grayscale are beginning to subside, as the daily total continued to reduce over the week. The report attributes this to the fact that Grayscale has announced plans to convert its flagship product, the Grayscale Bitcoin Trust (GBTC), into an ETF, pending regulatory approval. This could potentially reduce the discount of GBTC to the net asset value (NAV) of its underlying assets, which has been a major factor driving the outflows.

The report also notes that the price declines of Bitcoin and other digital assets in the last week, which were partly driven by the outflows from the investment products, have not deterred the inflows into the US ETFs. The report speculates that this is because the US ETFs have been funded by Bitcoin seed capital that was acquired prior to 11 January 2024, rather than by new investors entering the market.

Among the digital assets, Bitcoin remained the primary focus, seeing US$479m of outflows in the last week. The report also highlights the growing interest in short-bitcoin products, which saw US$10.6m of inflows in the same period. Altcoins, such as Ethereum, Polkadot and Chainlink, also saw predominantly outflows, totalling US$39m, US$0.7m and US$0.6m respectively.

On the other hand, blockchain equities, which are stocks of companies that are involved in the blockchain industry, saw further inflows of US$17m in the last week. The report suggests that this reflects the continued optimism and innovation in the sector, despite the volatility and uncertainty in the digital asset market.

The report concludes by stating that the digital asset investment product landscape is undergoing a significant transformation, as the US ETFs are reshaping the demand and supply dynamics of the market. The report expects that the US ETFs will continue to dominate the inflows in the coming weeks, while the outflows from the other regions and platforms will gradually ease.

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