Cryptocurrencies post record outflows in first week of 2022
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The cryptocurrencies sector has experienced four consecutive weeks of outflows since mid-December.
PHOTO: AFP
NEW YORK (REUTERS) - Cryptocurrency investment products and funds had net outflows last week totalling a record US$207 million (S$280.6 million), a report from digital asset manager CoinShares showed on Monday (Jan 10), as prices continued their tumble in the first trading week of the year.
The sector has experienced four consecutive weeks of outflows since mid-December, reaching a total of US$465 million, or 0.8 per cent of total assets under management.
Bitcoin, the world's largest cryptocurrency in terms of market capitalisation, posted outflows of US$107 million in the week to Jan 7.
CoinShares investment strategist James Butterfill said the outflows were a "direct response" to the Federal Open Market Committee minutes that revealed the United States Federal Reserve's concerns for rising inflation and "the fear among investors of an interest rate hike".
A policy tightening by the Fed is a negative factor for risk assets such as cryptocurrencies because of tighter liquidity conditions and increased market volatility.
Over the last four weeks, Coinshares noted that there has been greater investor activity than usual.
Since the start of the year, Bitcoin has shed nearly 10 per cent of its value against the US dollar. On Monday, it fell below US$40,000 for the first time since September 2021.
"A phase of heavy loss realisation by top buyers has followed the Dec 4 flush-out (in Bitcoin)," said blockchain data provider Glassnode in its latest research report on Monday.
"In the weeks since, on-chain behaviour has been more heavily dominated by (long-term holders)... with little activity by newer market entrants," it added.
Ethereum-based products had outflows of US$39 million last week, posting five straight weeks of outflows with a total of US$200 million. CoinShares said that on a proportional basis, Ethereum's outflows were 1.4 per cent of total assets under management, higher than that of Bitcoin.
Blockchain-linked equity investment products did not escape the negative sentiment for the sector, with outflows of US$10 million last week.
Assets under management at Grayscale and CoinShares, the world's two largest digital asset managers, fell from their highs to US$38.2 billion and US$4.3 billion respectively.
