Crypto ETF Flows Show $454M Weekly Outflow

What to Know:

• Digital asset investment products experienced a significant outflow of $454 million last week, reversing early January inflows.
• The outflows are largely attributed to concerns that the Federal Reserve may not cut interest rates in March, influenced by recent macroeconomic data.
• XRP investment products bucked the trend, attracting $45.8 million in inflows, suggesting positive sentiment toward XRP and potential benefits for its liquidity.

Digital asset investment products saw a sharp reversal in investor sentiment, with a net outflow of $454 million last week. This shift erases the $1.5 billion that flowed into these products in the first two trading days of January, marking a notable change in market dynamics. The outflows coincided with growing concerns about the Federal Reserve’s monetary policy, which appears to be impacting investor behavior in the crypto space.

Bitcoin and Ethereum Lead Outflows

Bitcoin-linked products were the hardest hit, experiencing outflows of $405 million, according to CoinShares’ latest Digital Asset Fund Flows Weekly Report. Short-Bitcoin products also saw $9.2 million in outflows, indicating a divided sentiment on Bitcoin’s near-term price direction. Ethereum-based products faced significant selling pressure as well, with $116 million in outflows. Multi-asset strategies also experienced a decline, with $21 million exiting these products.

XRP and Solana Attract Capital

Despite the overall negative trend, several altcoin investment products managed to attract fresh capital. XRP led the way with $45.8 million in inflows, followed by Solana with $32.8 million. Sui and Chainlink also saw positive inflows, suggesting continued interest in select altcoins. The inflows into XRP could reflect optimism surrounding its regulatory outlook and potential utility, which may positively impact its liquidity and market performance.

Regional Disparities in Investment Flows

The pullback in digital asset investment products was primarily driven by activity in the United States, which saw $569 million in outflows. In contrast, Germany recorded the strongest inflow of $58.9 million, followed by Canada and Switzerland. These regional differences highlight varying levels of confidence and adoption of digital assets across different geographic areas. The data suggests that while the US market is showing caution, other regions maintain a more positive outlook on crypto investments.

Market Sentiment and Options Trading

Recent Bitcoin price action reflects ongoing pressure and limited upside in the near term, according to QCP Capital. Bitcoin has struggled to hold gains, even when supported by positive narratives. Changes in options markets reveal that traders have reduced bullish long-dated call positions, rolling others to later expiries, indicating delayed expectations for higher prices. This cautious sentiment is compounded by continued selling during US trading hours, lingering supply pressures, and rising macro uncertainty, all of which contribute to near-term volatility risks.

Macroeconomic Factors Weighing on Crypto

The shift in sentiment towards digital assets appears closely tied to macroeconomic developments, particularly expectations regarding the Federal Reserve’s interest rate policy. Stronger-than-expected macroeconomic data has led to concerns that the Fed may delay or reduce the extent of interest rate cuts, impacting risk appetite across various asset classes, including cryptocurrencies. This macro uncertainty, combined with legal and regulatory developments, continues to weigh on digital asset prices and investor sentiment.

In conclusion, the recent outflows from digital asset investment products reflect a cautious stance among investors, driven by macroeconomic concerns and regulatory uncertainty. While Bitcoin and Ethereum experienced significant selling pressure, XRP and Solana bucked the trend, attracting fresh capital. The market’s near-term direction will likely depend on upcoming economic data and regulatory developments, which could further shape investor sentiment and market dynamics.

Related: XRP Signals Bullish Turn, Bitcoin Whale Moves Funds

Source: Original article