Losing Crypto Funds Money by Fed?
Cryptocurrency funds have recorded their second consecutive week of outflows, with investors pulling around $30 million two weeks ago and a whopping $72 million last week, according to CoinShares, a digital asset investment company. This comes during a time when Bitcoin (BTC) has crossed the psychological mark of $30,000, which should signal a bullish trend. CoinShares suggests that investors who expected the Federal Reserve to hike interest rates were behind the major withdrawals, as history has shown that rate hikes tend to harm risky assets. Last night, the Federal Reserve announced an interest rate hike, which although widely-expected, would have further provoked the exodus of crypto funds.
This raises the question of whether cryptocurrency investors are straightforward or erratic in their decision-making process. Exchange Traded Funds (ETFs) centered around bitcoin saw the largest volume losses last week, with a whopping $46 million in outflows. What’s surprising is that funds that short bitcoin, and which therefore hope for a falling bitcoin price, also experienced outflows. However, since December 2022, the funds in question have not seen such an intense level of outflows, signifying that investor sentiment is dynamic, though it’s hard to determine the rationale given how much information is missing.
Limited Growth for Solana (SOL) and Cardano (ADA)
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Amidst this negative trend, Solana (SOL) and Cardano (ADA) have both experienced some nominal growth, with SOL increasing by $200,000 and ADA increasing by $100,000. However, given that growth has been limited for these cryptocurrencies over the past few months, it remains to be seen how sustainable this trend will be.
Germany’s Role in the Crypto Fund Outflows
CoinShares also highlights that Germany, with outflows of $40.3 million, has become a leading source of outflows. This is surprising, as Germany was one of the few countries with a net inflow of crypto funds two weeks ago. Last week, however, all countries except Australia contributed to net outflows. In Australia, investors purchased an additional $300,000 in cryptocurrency.
In conclusion, the outflows from cryptocurrency funds can be attributed to investors’ expectations of Fed interest rate hikes, which are typically unfavorable to risky assets. While the motivations and sentiments of these investors are still unclear, it’s notable that even funds short on Bitcoin saw outflows last week, indicating a variable sentiment in the larger investor community. Meanwhile, Solana and Cardano’s recent growth may be an outlier, considering that growth has been limited over the past few months. Finally, Germany, which was previously seeing net inflows of crypto funds, has now become a leader in net outflows, while Australia is the only country with a net inflow.