The trend of inflows into digital asset investment products reversed sharply last week as the assets under management (AUM) of globally listed products fell by $500 million, the largest level of outflows in more than a year.
The outflows were dominated by Grayscale, which declined by $2.2 billion, although data from CoinShares suggests those outflows are beginning to subside.
“Recent price declines prompted by the substantial outflows from the incumbent ETF issuer (Grayscale) in the US totaling US$5bn (since 11th January 2024), have likely prompted further outflows [in] other regions,” said James Butterfill, head of research at CoinShares.
Butterfill noted that the net flows for all of the recently listed spot BTC ETFs in the U.S. now stands at $807 million. “We believe that much of the price falls, despite these positive flows, was due to Bitcoin seed capital being acquired prior to 11th January,” he said.
US-listed products accounted for the bulk of outflows with $408.8 million exiting these funds, followed by outflows of $59.8 million in Switzerland and $31.7 million in Germany.
Brazil was the only region to see a notable increase, recording $10.3 million in net inflows.
The two top cryptocurrencies, Bitcoin (BTC) and Ethereum (ETH), accounted for the majority of the outflows, representing $478.9 million and $38.8 million, respectively.
Short-Bitcoin saw inflows of $10.6 million as many traders expect Bitcoin’s price to continue to slide lower. Multi-asset crypto products recorded $7.1 million in inflows, and the AUM for Solana products increased by $3 million.
“Polkadot and Chainlink [saw outflows of] US$0.7m and US$0.6m, respectively,” Butterfill said, and “Blockchain equities saw further inflows totaling US$17m last week.”
Sentiment in the crypto ecosystem has risen back into “Greed” territory to start the week after being “Neutral” on Sunday, data from Alternative shows.
Crypto Fear & Greed Index. Source: Alternative
While many in the ecosystem are now looking at the potential approval of a spot Ether ETF as the next big catalyst that could drive crypto prices higher, analysts at TD Cowen don’t see an approval coming until late 2025 at the earliest.
"We do not expect the SEC in 2024 to approve a spot Ethereum ETF," TD Cowen Washington Research Group, led by Jaret Seiberg, wrote in a note on Monday. "This is a political call. We believe there is no upside for SEC Chair Gary Gensler to approve a spot Ethereum ETF given how upset progressive Democrats were over the agency's approval of a spot bitcoin ETF earlier this month."
The analysts said that Gensler would need the support of progressive lawmakers to advance his agenda during the election year ahead, and would also need their support if he transferred to a different role, such as Treasury secretary.
So “there is no reason to provoke a needless fight,” TD Cowen said. “We say needless, as our view remains that Gensler is in no hurry to approve an Ethereum ETF as he would first like more experience with the performance of the recently approved spot Bitcoin ETFs. This is consistent with his broader approach to crypto, which is to move incrementally and slowly when it comes to providing regulatory approvals or clarity.”
The investment bank noted that while the ruling in Grayscale’s lawsuit against the SEC forced the regulator's hand when it came to approving a spot BTC ETF, no such pressure exists when it comes to an Ether ETF, so they can take their time in making a decision.
“[The SEC] can eventually reject the rule change, which either will lead to a new application or litigation,” the bank said. “Either will take another year or two to play out.” They added that the expected late 2025 or early 2026 approval deadline is possible even if Congress fails to enact broader crypto market structure legislation in 2025.
