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Crypto sentiment declines as digital asset products see fifth week of outflows

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(Kitco News) - Digital asset investment products continued to see outflows for the fifth consecutive week as a total of $54 million was withdrawn from various products during the week ending September 15, indicating that institutional interest in cryptocurrencies remains subdued amid broader economic concerns.

This is further highlighted by the fact that there have been outflows for eight out of the last nine weeks representing a total of $455 million in value exiting these funds, and bringing the year-to-date inflows to just $51 million.

According to James Butterfill, head of research at CoinShares, “Blockchain equities also saw its 6th consecutive week of outflows, totaling US$9.6m last week.”

Weekly crypto asset flows. Source: CoinShares

Bitcoin (BTC) remains the main focus of outflows as $45 million was pulled from these products last week, representing 85% of the total outflows. Short-Bitcoin products also saw a total of $3.8 million in outflows, indicating that interest in participating in either side of the market is waning.

Flows by asset. Source: CoinShares

Month-to-date inflows into short Bitcoin products are the highest among all assets, however, which provides further evidence that the overall sentiment is negative.

“The primary focus of the negative sentiment from a regional perspective has been the US, which saw 77% of the outflows, while Germany, Canada and Sweden also continue to suffer,” Butterfill said. “Volumes picked up a little to US$1bn for the week, up 42% compared to the prior week.”

Flows by country. Source: CoinShares

Ethereum products suffered the second largest drawdown with $4.8 million flowing out of these products while Binance (BNB) and Polygon (MATIC) saw minor outflows of $0.3 million each.

Solana, Cardano and XRP all managed to buck the prevailing trend to record inflows of $0.7 million, $0.43 million, and $0.13 million, respectively.

According to the latest newsletter from data analytics firm Glassnode, the decline in sentiment comes as almost all short-term Bitcoin holders are now underwater on their position.

Percent of short-term BTC holder supply in profit. Source: Glassnode

“The Bitcoin market is experiencing a non-trivial shift in sentiment, with almost all Short-Term Holders now underwater on their supply,” Glassnode said. “This has resulted in a negative shift in sentiment, with investors spending now having a lower cost basis than the rest of the cohort. This suggests a degree of panic is dominating this group, which is the first time since FTX collapsed.”

Bitcoin: New investor's confidence in trend. Source: Glassnode

“Several metrics suggest that 2023 has seen a positive, but low momentum influx of new capital and new investors,” Glasnode said. “This speaks to the persistent uncertainty coming from the macro-economic conditions, regulatory pressures, and tightness of liquidity across all markets.”

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