Digital Asset Investments Surge with Record $1.76bn Inflows in 10 Weeks
Digital asset inflows totalled $176 million last week, reaching a 10-week total of $1.76 billion, the highest since October 2021’s futures-based ETF launch in the US.
Canada, Germany, and the US led with significant inflows, while Hong Kong experienced minor outflows; Asia overall saw year-to-date net outflows.
Bitcoin saw $133 million in inflows, Ethereum $31 million, while blockchain equities marked their seventh consecutive week of inflows.
Digital asset investment products saw inflows totalling US$176m last week, marking the 10th consecutive week of inflows totalling US$1.76bn, or 4% of assets under management (AuM). This run of inflows is now the largest since October 2021, which saw the launch of the futures-based ETF in the US. Total AuM has risen by 107% this year so far, but at US$46.2bn, remains well below the all-time high of US$86.6bn seen in 2021. Trading volumes in ETPs remain high at US$2.6bn for the week, representing 12% of total Bitcoin volumes.
Regionally, the focus was Canada, Germany and the US, which saw inflows of US$79m, US$57m and US$54m respectively. Minor outflows were seen from Hong Kong totalling US$15m. Although the total AuM in the Asian region is small and the number of ETPs remains very low, year-to-date it is one of the only regions to see net outflows.
Bitcoin was the main beneficiary, seeing US$133m inflows, although short-bitcoin, after a 3-week run of outflows, saw inflows of US$3.6m last week.
Ethereum saw a further US$31m inflows last week, bringing this 5-week run to US$134m, and for the first time this year net flows are now positive at US$10m, following a long bout of negative sentiment.
Blockchain equities have 7 consecutive weeks of inflows, with last weeks US$17.4m inflow the largest since July 2022.
ETPs inflows continue with US$176m, much larger volume share of total crypto
Digital asset investment products saw inflows totalling US$176m last week in a continuation of consecutive weekly inflows that has now lasted 8 weeks.
ETP share of total crypto volumes is rising, averaging 11% compared to the long-term historical average of 3.4%, and well above the averages seen in the 2020/21 bull market.
Bitcoin continued to dominate, seeing US$155m inflows, with the last 8 weeks of inflows representing 3.4% of AuM.
Digital asset investment products saw inflows totalling US$176m last week in a continuation of consecutive weekly inflows that has now lasted 8 weeks, bringing year-to-date inflows to US$1.32bn. However, the inflows remain well behind 2021 and 2020, which saw US$10.7bn and US$6.6bn respectively. Trading volumes in ETPs have averaged US$3bn per week, double this year’s average of US$1.5bn. Interestingly, ETP share of total crypto volumes is rising, averaging 11% compared to the long-term historical average of 3.4%, and well above the averages seen in the 2020/21 bull market.
Regionally, Canada, Germany and Switzerland continued to see inflows of US$98m, US$63m and US$35m respectively, while the US saw outflows from futures-based products totalling US$19m.
Bitcoin continued to dominate, seeing US$155m inflows, with the last 8 weeks of inflows representing 3.4% of total assets under management. Short-bitcoin saw outflows of US$8.5m last week. We believe this continued positive sentiment is related to the imminent approval of a spot-based Bitcoin ETF in the US, we have written here about its potential price impact.
A wide selection of altcoins saw inflows, most notable were Solana, Ethereum and Avalanche which saw US$13.6m, US$3.3m and US$1.8m respectively. While Uniswap and Polygon saw minor outflows of US$0.55m and US$0.86m respectively.
The big question once a Bitcoin spot ETF is launched in the US, is just how much inflows into ETFs this may prompt? and what impact on price those flows may have? Some good analysis has already been done on the former by Galaxy who surmised that there are US$14.4 trillion addressable assets in the United States. One could assume that perhaps 10% invest in a spot bitcoin ETF with an average allocation of 1%, which would equate to US$14.4 billion of inflows in the first year. If this were correct then it would be the largest inflows on record, with the largest so far being in 2021, which saw US$7.24 billion of inflows, representing 11.5% of assets under management (AuM). On a proportional basis though, 2021 did not see the largest inflows, that was in 2020, where we saw US$5.5 billion of inflows representing a higher 21.6% of AuM. It was also a year where the price rose by 303%, compared to 60% in 2021.
There does seem to be a relationship between inflows as a percentage of AuM and change in price. Inflows do appear to be coincident, the week the prices rise so do flows rather than one leading the other.
The highest inflows were witnessed when the prices were rising, suggesting many ETP investors are momentum trading. In periods where the price has floundered, the flows have moderated too, early 2019 and 2022 being good examples of this. We do not believe that ETP investors necessarily lead price action too, this is evident in the volumes data, which highlights that ETP volumes have averaged 3.5% of daily bitcoin trading turnover on trusted exchanges, based on data going back to 2018. This year is unusual in the fact that ETP volumes have proportionally risen, this is due to the dramatic fall in volumes from Binance rather than a rise in ETP volumes. Historically at least, as overall market volumes rise, so have ETP volumes, where there is a form of “sentiment matching”.
Looking at weekly ETP flows from a quantitative perspective, there is a relationship. Looking at 45 day change in prices and weekly flows as a percentage of AuM, the R2 is 0.31, not perfect by any means but signifies some semblance of a trend does exist.
Using this trendline it can help us predict what inflows would have on price. If we take the aforementioned US$14.4 billion of inflows, the model suggests it could push the price up to US$141,000 per Bitcoin. The problem with the estimate of inflows is that it is very difficult to ascertain exactly how much inflows there will be when the spot ETFs are launched. Below is a simple matrix with a varied set of inflows, and its potential impact on the Bitcoin price.
Ultimately, it is very difficult to ascertain just how big the potential wall of demand will be once a spot-based ETF is launched. We know that it effectively diversifies a portfolio and enhances sharpe ratios, as discussed here, but regulatory approval and corporate acceptance are slow burn issues due to Bitcoin’s perceived complexity. For this reason it may well take some time for corporations and funds to build up their knowledge and confidence before they decide to invest.
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The information contained in this document is for general information only. Nothing in this document should be interpreted as constituting an offer of (or any solicitation in connection with) any investment products or services by any member of the CoinShares Group where it may be illegal to do so. Access to any investment products or services of the CoinShares Group is in all cases subject to the applicable laws and regulations relating thereto.
This document is directed at professional and institutional investors. Investments may go up or down in value and you may lose some or all of the amount invested. Past performance is not necessarily a guide to future performance. This document contains historical data. Historical performance is not an indication of future performance and investments may go up and down in value. You cannot invest directly in an index. Fees and expenses have not been included.
Although produced with reasonable care and skill, no representation should be taken as having been given that this document is an exhaustive analysis of all of the considerations which its subject-matter may give rise to.This document fairly represents the opinions and sentiments of CoinShares, as at the date of its issuance but it should be noted that such opinions and sentiments may be revised from time to time, for example in light of experience and further developments, and this document may not necessarily be updated to reflect the same.
The information presented in this document has been developed internally and / or obtained from sources believed to be reliable; however, CoinShares does not guarantee the accuracy, adequacy or completeness of such information. Predictions, opinions and other information contained in this document are subject to change continually and without notice of any kind and may no longer be true after the date indicated. Third party data providers make no warranties or representation of any kind in relation to the use of any of their data in this document. CoinShares does not accept any liability whatsoever for any direct, indirect or consequential loss arising from any use of this document or its contents.
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ETP inflows push past the US$1bn mark this year, with US$293m inflows last week
Digital asset investment products saw inflows totalling US$293m last week, bringing this 7-week run of inflows past the US$1bn mark.
Bitcoin ETP trading volumes made up as much as 19.5% of total Bitcoin trading volumes, suggesting ETP investors are participating much more in this rally compared to 2020/21.
Ethereum, saw its largest inflows since August 2022 of US$49m, with the last 2 weeks signifying a real turn around in sentiment.
Digital asset investment products saw inflows totalling US$293m last week, bringing this 7-week run of inflows past the US$1bn mark, leaving year to date inflows at US$1.14bn, making it the third highest yearly inflows on record. Total assets under management (AuM), as a result of these inflows and recent price appreciation, total assets under management have risen 9.6% over the last week and 99% since the beginning of the year. At US$44.3bn, total AuM is now the highest since the major crypto fund failures in May 2022.
Bitcoin ETP trading volumes made up as much as 19.5% of total Bitcoin trading volumes on trusted exchanges. This has rarely happened and suggests ETP investors are participating much more in this rally compared to 2020/21.
Bitcoin saw inflows totalling US$240m last week, pushing year-to-date inflows to US$1.08bn, while short-bitcoin saw US$7m outflows, indicative of continue positive sentiment.
Ethereum, saw its largest inflows since August 2022 of US$49m, with the last 2 weeks signifying a real turn around in sentiment, likely related to the recent spot-based ETF listing request in the US. Solana also saw further inflows totalling US$12m.
Blockchain equity ETFs saw US$US$14m, the largest since July 2022, bringing year-to-date flows to a positive position of US$11m.
Positive sentiment continues with 6th week of inflows totalling US$261m
Digital asset investment products saw inflows totalling US$261m, representing the 6th week of consecutive inflows that now totals US$767m, surpassing the total inflows of US$736m seen in 2022.
Bitcoin saw the lion’s share of inflows, totalling US$229m, bringing year-to-date inflows to US$842m, likely buoyed by the increasing likeliness of a spot-based ETF in the US.
Ethereum saw the largest inflows since August 2022, totalling US$17.5m.
Digital asset investment products saw inflows totalling US$261m, representing the 6th week of consecutive inflows that now totals US$767m, surpassing the total inflows of US$736m seen in 2022. This run of inflows now matches the July 2023 run of inflows and is the largest since the end of the bull market in December 2021.
US investors are beginning to participate, seeing the largest inflows of any region, totalling US$157m while Germany, Switzerland and Canada continued to see inflows of US$63m, US$36m and US$9m respectively.
Bitcoin saw the lion’s share of inflows, totalling US$229m, bringing year-to-date inflows to US$842m, likely buoyed by the increasing likeliness of a spot-based ETF in the US and weaker than expected macro data, bringing in to question the efficacy of US monetary policy. Short-bitcoin also saw inflows of US$4.5m, highlighting some investors see the recent rally as unsustainable.
Ethereum, which has endured a terrible run of outflows this year totalling US$107, saw the largest inflows since August 2022, totalling US$17.5m.
Other altcoins, such as Solana saw inflows totalling US$11m, while Chainlink saw inflows of US$2m, representing 17% of total assets under management. Polygon and Cardano also saw inflows of US$0.8m and US$0.5m respectively.
Rising optimism prompts largest inflows for 1 & ½ years at US$326m
Digital asset investment products saw inflows of US$326m, the largest single week of inflows since July 2022.
Bitcoin saw 90% of the inflows at US$296m, although recent prices rise also prompted inflows of US$15m into short-Bitcoin investment products.
The improving optimism also prompted significant inflows of US$24m into Solana, while some other altcoins saw inflows this optimism did not include Ethereum which saw another US$6m of outflows.
Digital asset investment products saw inflows of US$326m, the largest single week of inflows since July 2022, in what we believe was rising optimism from investors that the US Securities and Exchange Commission is poised to approve a spot-based Bitcoin ETF in the US. Month-to-date inflows are now close to half a billion dollars. While positive for Bitcoin, this weekly inflow ranks as only the 21st largest on record, suggesting continued restraint amongst investors, although we do believe a spot-based ETF is now highly likely in the coming months, and will represent a step-change for the industry from a regulatory perspective.
From a regional perspective, only 12% of the flows were from the US at US$38m, presumably as investors wait for the spot-based ETF. The largest flows were from Canada, Germany and Switzerland, with inflows of US$134m, US$82m and US$50m respectively. We have also seen the largest weekly inflows from Asia at US$28m. Total assets under management are now at US$37.8bn, the highest since May 2022.
Bitcoin saw 90% of the inflows at US$296m, although recent prices rise also prompted inflows of US$15m into short-Bitcoin investment products.
The improving optimism also prompted significant inflows of US$24m into Solana, while some other altcoins saw inflows this optimism did not include Ethereum which saw another US$6m of outflows.
Anticipation of a spot Bitcoin ETF prompts further inflows
Digital asset investment products saw inflows for the 4th consecutive week totalling US$66m. Total AuM has now risen to US$33bn.
While the most recent inflows are likely linked to excitement over a spot bitcoin ETF launch in the US, they are relatively low in comparison to June announcements, suggesting more caution from investors this time round.
Solana saw a further US$15.5m inflows last week, bringing year-to-date inflows to US$74m (47% of AuM) — making it the most popular altcoin this year so far.
Digital asset investment products saw inflows for the 4th consecutive week totalling US$66m, bringing the last 4 week run of inflows to US$179m. Following recent price appreciation, total Assets under Management (AuM) have risen by 15% since their lows in early September, now totalling nearly US$33bn, the highest point since mid-August.
While the most recent inflows are likely linked to excitement over a spot bitcoin ETF launch in the US, they are relatively low in comparison to the initial inflows following Blackrock’s announcement in June, where 4 consecutive weeks of inflows totalled US$807m. It suggests that the lower inflows this time round, despite the positive news from the Grayscale vs SEC court ruling, are indicative of investors adopting a more cautious approach this time.
84% of the inflows were into bitcoin investment products, pushing inflows year-to-date to US$315m. Earlier last week, price rises had pushed inflows into short-bitcoin to US$23m, however, these positions were pared back substantially, with net inflows by the end of the week totalling just US$1.7m, suggesting short sellers are losing confidence.
Continued concerns over Ethereum have led to further outflows of US$7.4m, the only altcoin to see outflows last week. This is in stark contrast to Solana which saw a further US$15.5m inflows last week, bringing year-to-date inflows to US$74m, representing 47% of total AuM.
Sentiment steadily improving, with another week of inflows
Digital asset investment products saw inflows for the 3rd consecutive week totalling US$15m, although trading volumes remain 27% below the 2023 average.
Bitcoin saw US$16m inflows last week, bringing the year-to-date inflows to US$260m, while short-bitcoin saw inflows of US$1.7m last week too.
Last week was not positive for altcoins in general, with Tezos, Litecoin and Chainlink seeing outflows totalling US$0.25m, US$0.28m and US$0.31m respectively.
Digital asset investment products saw inflows for the 3rd consecutive week totalling US$15m, although trading volumes remain 27% below the 2023 average. A regional divide persists, with continued minimal inflows into the US, while Europe saw net inflows totalling US$7m last week, Sweden being the only country to see outflows.
Bitcoin saw US$16m inflows last week, bringing the year-to-date inflows to US$260m, while short-bitcoin saw inflows of US$1.7m last week too. It is worth noting that our data, which is as of Friday’s close, was unlikely to capture the positive news out of the US regarding the SEC not appealing the Grayscale legal challenge, potentially paving the way for a spot-based ETF in the US.
Last week was not positive for altcoins in general, with Tezos, Litecoin and Chainlink seeing outflows totalling US$0.25m, US$0.28m and US$0.31m respectively. XRP saw modest inflows amounting to US$0.42 million. This marks the 25th consecutive week of inflows into XRP this year. The consistent inflows underscore the investment community’s support, especially considering successful legal challenges against the SEC.
Ethereum, despite the recent launch of a futures-based ETF, has seen little appetite from investors, with outflows of US$7.5m last week, correcting much of the inflows seen the prior week. This perhaps reflects ongoing protocol design concerns.
Digital asset investment products saw inflows for the second week totalling US$78m, while trading volumes for ETPs also rose by 37% to US$1.13bn for the week.
The Ethereum futures ETF launches in the US attracted just under US$10m in the first week, highlighting tepid appetite.
Solana saw its largest week of inflows of US$24m since March 2022, continuing to assert itself as the altcoin of choice.
Digital asset investment products saw inflows for the second week totalling US$78m, while trading volumes for ETPs also rose by 37% to US$1.13bn for the week. We also saw a rise in Bitcoin volumes of 16% on trusted exchanges.
Regionally, the divide continues, with 90% of inflows from Europe, while the US and Canada saw just US$9m inflows combined, suggesting a continued divergence in sentiment.
Bitcoin was the main beneficiary, seeing inflows totalling US$43m last week, although some investors saw recent price strength as an opportunity to add to short-bitcoin positions, which saw inflows of US$1.2m over the same period.
Last week was an important test for Ethereum investor appetite following the launch of 6 futures-based ETFs in the US. The new ETFs attracted just under US$10m in the first week, highlighting tepid appetite, particularly in comparison to the launch of futures based Bitcoin ETFs which saw US$1bn in the first week. It is likely due to poor investor appetite for digital assets at present, and unfair to compare to the Bitcoin futures ETF launches in October 2021, as appetite was much higher for the assets class overall.
Solana saw its largest week of inflows of US$24m since March 2022. Continuing to assert itself as the altcoin of choice, particularly in light of the recent Ethereum product launches.
Recent US Government Quagmire and Treasure prices fuel inflows of US$21m
Digital asset investment products saw inflows last week for the first time in 6 weeks totalling US$21m.
We believe the inflows are a reaction to a combination of positive price momentum, fears over US government debt prices and the recent quagmire over government funding.
Solana continues to shine, with inflows of US$5m, marking its 27th week of inflows and just 4 weeks of outflows this year.
Digital asset investment products saw inflows last week for the first time in 6 weeks totalling US$21m. Earlier in the week it looked as if it would be another week of outflows, with the inflows coming late in the week (Friday) in what we believe is a reaction to a combination of positive price momentum, fears over US government debt prices and the recent quagmire over government funding. Despite this most recent price pick up, volumes remain seasonally low in both the investment product market and the broader crypto market.
The recent regional divergence persists, with the US seeing outflows totalling US$19m last week, while Europe and Canada saw inflows of US$23m and US$17m respectively.
Bitcoin inflows totalled US$20m last week, seeing the majority of inflows, while outflows continue in short-bitcoin which saw US$1.5m last week, bringing outflows since April to US$85m.
Very little activity was seen in the altcoin space, Solana continues to shine, with inflows of US$5m, marking its 27th week of inflows and just 4 weeks of outflows this year, highlighting it as the most loved altcoin this year. Ethereum saw outflows for a 7th consecutive week, totalling US$1.5m, marking it as the least loved altcoin.
Blockchain equities saw outflows of US$8.4m, inline with a broader sell-off in the technology sector.
Outflows over the last 9 weeks aggregate to almost US$0.5bn
Digital asset investment products saw outflows totalling US$54m last week, with outflows for 8 out of the last 9 weeks that aggregate to US$455m.
Bitcoin comprised 85% of the outflows, seeing US$45m last week. Short-bitcoin inflows the prior week proved to be short-lived, with outflows of US$3.8m last week.
Ethereum saw outflows totalling US$4.8m last week, despite what we believe are attractive investment fundamentals and high demand for its staking yield.
Digital asset investment products saw outflows totalling US$54m last week, marking the 5th consecutive week. There have been outflows for 8 out of the last 9 weeks that aggregate to US$455m, with year-to-date net inflows falling to just US$51m. 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. Volumes picked up a little to US$1bn for the week, up 42% compared to the prior week.
Bitcoin comprised 85% of the outflows, seeing US$45m last week. Short-bitcoin inflows the prior week proved to be short-lived, with outflows of US$3.8m last week, However, it remains the most loved investment product with month-to-date inflows at US$12m.
Ethereum saw outflows totalling US$4.8m last week, despite what we believe are attractive investment fundamentals and high demand for its staking yield. Other altcoins, such as Binance and Polygon saw minor outflows of US$0.3m each.
Some altcoins continue to buck the trend, with Solana, Cardano and XRP all seeing inflows of US$0.7m, US$0.43m and US$0.13m respectively.
Blockchain equities also saw its 6th consecutive week of outflows, totalling US$9.6m last week.
Sentiment remains poor, with a further US$59m outflows last week
Digital asset investment products saw outflows totalling US$59m last week, this run of outflows now totals US$294m.
Bitcoin suffered the most, seeing outflows of US$69m last week, while short-bitcoin saw its largest single week of inflows since March 2023, totalling US$15m.
Blockchain equities did not escape the negative sentiment, with US$10.8m outflows, marking the 5th consecutive week of outflows.
Digital asset investment products saw outflows totalling US$59m last week, marking the fourth consecutive week of outflows, this run of outflows now totals US$294m and represents 0.9% of total assets under management (AuM). Inflows were also seen in short investment products, suggesting sentiment remains poor for the asset class. We believe continued worries over regulation of the asset class and recent dollar strength are the most likely reasons for this. Trading volumes also dropped significantly, by 73% in comparison to the prior week to just US$754m for the week.
Bitcoin suffered the most, seeing outflows of US$69m last week, while short-bitcoin saw its largest single week of inflows since March 2023, totalling US$15m. Timing wise this is interesting as the inflows in March also came at a time of heightened regulatory uncertainty.
Ethereum also suffered, seeing outflows totalling US$4.8m. This brings year-to-date outflows to US$108m, representing 1.6% of AuM, demarcating it as the least loved digital asset amongst ETP investors this year. Conversely, XRP continued to see inflows totalling US$0.7m last week.
Blockchain equities did not escape the negative sentiment, with US$10.8m outflows, marking the 5th consecutive week of outflows.
Minor outflows, but inflows for Bitcoin, is negative sentiment on the turn?
Digital asset investment product flows cooled off, with relatively minor outflows totalling US$11.2. This run of negative sentiment over the last 7 weeks now totals US$342m.
Despite little activity on flows, trading volumes were much higher than average, totalling US$2.8bn for the week, 90% above the YTD average.
Polygon and Ethereum saw US$8.6m and US$3.2m outflow respectively. While Solana, saw inflows for the 9th consecutive week totalling US$0.7m.
Digital asset investment product flows cooled off, with relatively minor outflows totalling US$11.2. This run of negative sentiment over the last 7 weeks now totals US$342m. Year-to-date digital asset investment products remain in a net inflow position totalling US$165m, with the year so far beset with large gyrations of investor flows, very much driven by the hopes and concerns for regulation on digital assets. Last week exemplified this, beginning the week investors had high hopes for a spot ETF approval in the US, only to be quashed by the announcement of a delay for all other spot ETF applications. Despite little activity on flows, trading volumes were much higher than average, totalling US$2.8bn for the week, 90% above the YTD average.
Bitcoin saw inflows totalling US$3.8m, while short bitcoin saw outflows for its 19th consecutive week totalling US$3.3m, with total assets under management (AuM) having fallen 48% from this years peak.
Altcoins saw outflows, most notable being Polygon and Ethereum, which saw US$8.6m and US$3.2m respectively. While Solana, saw inflows for the 9th consecutive week totalling US$0.7m, the YTD inflows of US$26m suggest it is the most loved altcoin amongst investors at present.
Blockchain equities saw outflows for the 4th week, totalling US$25m.
This year, trading activity appears to have taken an unexpected downturn, a trend many attribute to growing investor disinterest. Conversations with our trading team corroborate this observation, revealing fewer market participants and an ongoing withdrawal by numerous market makers. Some are now operating on a 24-hour schedule for just five days a week, as opposed to daily. Additionally, low volatility in the market has diminished opportunities for day trading. In the retail sector, there is also a noticeable shift towards the allure of on-chain tokens.
When examining Bitcoin trading volumes on trusted exchanges, there’s a marked decline. The daily trading turnover this year averages around US$7 billion, a significant drop compared to the robust volumes witnessed in 2021 and 2022, which averaged US$13.8 billion and US$11 billion, respectively. Seasonal fluctuations have also been evident, with five of the last seven years of Q3 (summer) trading showing average volumes lower than their respective annual averages.
However, the story is more complex than what this headline data suggests.
As indicated in the above chart, trading volumes had been relatively stable, averaging over US$10 billion per day each quarter since the onset of the late 2020 bull run. Yet, starting in the second quarter of this year, we’ve witnessed a substantial decline in volumes, reverting to levels reminiscent of the pre-bull run period in 2019/2020. What explains this downturn?
The initial surge during the bull run was primarily fueled by a growing number of investors trading alternative cryptocurrencies (altcoins) against Bitcoin, as well as converting into various fiat currencies.
However, in late 2021, we observed a significant increase in Bitcoin trading against U.S. dollar-backed stablecoins as well. This trend strongly correlated with investors’ growing appetite for the U.S. dollar, particularly as it became apparent that the U.S. Federal Reserve was planning to hike interest rates. The chart below illustrates this relationship, juxtaposing the trade-weighted dollar against the market share of stablecoins in Bitcoin trading volumes. During this period, investors were notably liquidating their Bitcoin holdings in favour of U.S. dollar stablecoins.
However, this doesn’t fully account for this year’s decline in trading volumes, a fact that becomes more apparent when the data is segmented by individual exchanges.
It’s evident that Binance played a significant role in the trading volume decline observed in March 2023, which coincided with two major events. First, Binance concluded a year-long reduction in trading fees. Second, the U.S. Securities and Exchange Commission (SEC) announced a more stringent regulatory approach to exchanges than many had anticipated. The cumulative impact has been a pronounced decrease in trading volumes compared to previous years. Additionally, we’ve observed a substantial decline in BUSD volumes, with Tether reclaiming a 15% market share at the expense of stablecoins hosted by exchanges that are directly overseen by the SEC.
Though the market may currently seem apathetic, there are reasons for optimism. Long-term trends indicate rising volumes, and short-term data suggests a resurgence is underway. Notably, investors appear to be diversifying their activities away from the U.S., reducing its staggering 90% market share at the beginning of the year to 60% as of today. Moreover, while Bitcoin’s trading volumes may seem lacklustre, they still surpass those of the London Stock Exchange, the sixth-largest stock exchange in the world.
Disclosure
The information contained in this document is for general information only. Nothing in this document should be interpreted as constituting an offer of (or any solicitation in connection with) any investment products or services by any member of the CoinShares Group where it may be illegal to do so. Access to any investment products or services of the CoinShares Group is in all cases subject to the applicable laws and regulations relating thereto.
This document is directed at professional and institutional investors. Investments may go up or down in value and you may lose some or all of the amount invested. Past performance is not necessarily a guide to future performance. This document contains historical data. Historical performance is not an indication of future performance and investments may go up and down in value. You cannot invest directly in an index. Fees and expenses have not been included.
Although produced with reasonable care and skill, no representation should be taken as having been given that this document is an exhaustive analysis of all of the considerations which its subject-matter may give rise to.This document fairly represents the opinions and sentiments of CoinShares, as at the date of its issuance but it should be noted that such opinions and sentiments may be revised from time to time, for example in light of experience and further developments, and this document may not necessarily be updated to reflect the same.
The information presented in this document has been developed internally and / or obtained from sources believed to be reliable; however, CoinShares does not guarantee the accuracy, adequacy or completeness of such information. Predictions, opinions and other information contained in this document are subject to change continually and without notice of any kind and may no longer be true after the date indicated. Third party data providers make no warranties or representation of any kind in relation to the use of any of their data in this document. CoinShares does not accept any liability whatsoever for any direct, indirect or consequential loss arising from any use of this document or its contents.
Any forward-looking statements speak only as of the date they are made, and CoinShares assumes no duty to, and does not undertake, to update forward-looking statements. Forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time. Nothing within this document constitutes (or should be construed as being) investment, legal, tax or other advice. This document should not be used as the basis for any investment decision(s) which a reader thereof may be considering. Any potential investor in digital assets, even if experienced and affluent, is strongly recommended to seek independent financial advice upon the merits of the same in the context of their own unique circumstances.
This document is directed at, and only made available to, professional clients and eligible counterparties. For UK investors: CoinShares Capital Markets (UK) Limited is an appointed representative of Strata Global Limited which is authorised and regulated by the Financial Conduct Authority (FRN 563834). The address of CoinShares Capital Markets (UK) Limited is 1st Floor, 3 Lombard Street, London, EC3V 9AQ. For EU investors: CoinShares AM (napoleon-am.com) is a French asset management company regulated by the Autorité des Marchés Financiers (AMF), registered under number GP-19000015 since 27/03/2019. Its office is located at 25 rue du 4 Septembre, 75002 Paris, France.
The Court of Appeals for the DC circuit finally issued (what may be, at least judged by interest on X — fka Twitter) one of the most eagerly awaited opinions in its history. The question: did the SEC violate the requirements of the Administrative Procedures Act (APA) by “arbitrarily and capriciously” rejecting Grayscale’s application (and by extension, applications from other issuers) for a spot Bitcoin ETF while approving applications for Bitcoin ETF’s based on CME futures.
The Court, comprising 3 judges of diverse political persuasions, ruled unanimously that the SEC did indeed violate the APA; furthermore, it ordered the SEC to rescind its rejection of the Grayscale proposal and to review its decision in a way that is consistent with the requirements of the APA.
There is a lot to unpack here but let’s go step by step:
What did the Court Decide?
I think it is important to first explain what the Court did not decide. It did not opine:
On the merits of the Grayscale application;
On the merits of the SEC’s concerns about fraud and manipulation;
On the need for surveillance sharing agreements;
On any of the SEC’s previous decisions rejecting applications for spot BTC ETFs.
Rather, the Court held that the SEC had not adequately distinguished its reasoning for favouring a futures-based ETF over the similar spot products, and that its inability or unwillingness to do so represented a violation of the APA. In its own words: “To avoid arbitrariness and caprice, administrative adjudication must be consistent and predictable, following the basic principle that similar cases should be treated similarly. NYSE Arca presented substantial evidence that Grayscale is similar, across the relevant regulatory factors, to bitcoin futures ETPs. The Commission failed to adequately explain why it approved the listing of two bitcoin futures ETPs but not Grayscale’s proposed bitcoin ETP. In the absence of a coherent explanation, this unlike regulatory treatment of like products is unlawful.”
“Hoist on its own Petard”
To some extent, the SEC is a victim of its own attempts to seek a compromise with the crypto industry. Indeed, it was Commissioner Gensler’s early support, expressed in various public speeches back in 2021, of futures backed ETFs that trapped the SEC in an APA maze of its own making. Back then, Commissioner Gensler expressed support for futures-backed products registered under the Investment Company Act of 1940 (essentially, proper funds) that could provide “significant investor protection” and stated publicly that he was looking “forward to Staff’s review of such filings.” Having approved the ’40 Act product, the Staff then extended those approvals to Grantor trust structures similar to the spot-backed proposals (which are registered under the Securities Act of 1933). It is that extension that the Court has used against the SEC in this opinion. Essentially, the Court used the SEC’s decision to approve futures-based bitcoin ETFs against it.
So the question now remains: how will the SEC react?
What Can the SEC Do?
The SEC can appeal. The Court’s review was done by 3 judges and the SEC can ask for an “en banc” review, which would then be reviewed by all 17 judges of the Court. They have 45 days to request an “en banc” review. Given the decision was 3–0 against the SEC, the chances of winning on appeal are not particularly good.
The SEC can rescind its previous rejection and then re-review Grayscale’s application (or review an amended application assuming Grayscale files one). That review would then have to comply with the Court’s ruling. If the SEC can find a way to distinguish spot and futures markets “across the relevant regulatory factors” and that distinction is meaningful, then there is a good chance it could survive further review. It is worth noting that the SEC did not try (either in its written briefs or during oral arguments) to provide any evidence contradicting Grayscale’s assertions of the 99% correlation between spot and futures markets. This failure to provide evidence was a crucial part of the Court’s reasoning in favour of Grayscale. If such evidence exists, that could provide adequate defence for the SEC’s position.
The SEC can look at rescinding approvals for futures backed ETFs that use the Grantor trust structure. AUM there is low relative to the ’40 Act product that dominates the market, but it would be a fairly churlish move and not particularly wise from a regulatory perspective.
Finally, the SEC can just concede defeat. Framing their decision as a commitment to the “rule of law,” despite disagreement, offers a diplomatic way to retreat from a losing position. There will likely be additional political impetus to approve spot bitcoin ETFs, given the broader financial industry’s interest, including heavyweight firms like Blackrock. This is not just about Grayscale; the entire traditional financial sector is poised for a spot bitcoin ETF. With other key players proposing their own ETFs, SEC Chair Gensler has the opportunity to reshape the agency’s narrative. The SEC has faced criticism for its perceived “regulation-by-enforcement” approach to crypto; approval of a spot bitcoin ETF would serve as a counter-narrative, showcasing their willingness to endorse suitable products.
No matter what happens, the Court’s decision has definitely put the SEC on the back foot and dramatically improved chances for the approval of a spot bitcoin ETF.
Digital asset investment products saw outflows totalling US$168m, the largest outflow since the US regulatory crackdown of exchanges in March 2023.
Bitcoin was the primary focus, seeing outflows last week totalling US$149m.
Many investors are continuing to sell their short positions, seeing US$4m outflows last week, with the last 18 week run of outflows representing 89% of total AuM.
Digital asset investment products saw outflows totalling US$168m, the largest outflow since the US regulatory crackdown of exchanges in March 2023. This August’s outflows now total US$278m in what has been an exceptionally low trading volume market, with investment products trading US$1.3bn for the week, 16% below the year average. This negative sentiment we believe is due to the increasing acceptance that a spot-based ETF for Bitcoin in the US is likely to take longer than many expect, with recent delays being announced by the SEC.
The outflows were spread across most geographies, highlighting the negative sentiment is broad-based. Germany and Canada, where most of activity has been in recent months, saw outflows of US$68m and US$61m respectively.
As usual, Bitcoin was the primary focus, seeing outflows last week totalling US$149m. Regardless, on a net basis flows remain positive for the year at US$265m. Many investors are continuing to sell their short positions, seeing US$4m outflows last week, with the last 18 week run of outflows representing 89% of total assets under management (AuM).
Ethereum was the only altcoin to see measurable outflows, totalling US$17m. While XRP and Litecoin saw minor inflows of US$0.5m and US$0.44m respectively.
Disappointment from SEC ETF decisions has impacted sentiment
Digital asset investment products saw outflows totalling US$55m, we believe this is in reaction to recent media highlighting that a decision by the US Securities & Exchange Commission in allowing a US spot-based ETF is not imminent.
Bitcoin saw outflows totalling US$42m, reversing the inflows seen the prior week, while short-bitcoin saw outflows for almost the 17th consecutive week.
Ethereum saw US$9m outflows, while Polygon, Litecoin and Polkadot also saw outflows of US$0.9m, US$0.6m and US$0.5m respectively.
Digital asset investment products saw outflows totalling US$55m, we believe this is in reaction to recent media highlighting that a decision by the US Securities & Exchange Commission in allowing a US spot-based ETF is not imminent. Market volumes remain well below average, primarily due to seasonal effects, leaving prices vulnerable to large trades. With the panic last week leading to a 10% decline in total assets under management (AuM), settling at US$32.3bn at the end of last week.
The outflows were broad across product providers although regionally were focussed primarily on Canada and Germany which saw outflows of US$36m and US$11m respectively. Switzerland bucked the trend seeing minor inflows totalling US$3.5m.
Bitcoin saw outflows totalling US$42m, reversing the inflows seen the prior week, while short-bitcoin saw outflows for almost the 17th consecutive week (except US$2k inflows) totalling US$2.2m.
This week the flows were not just focussed on Bitcoin, with a broad selection of altcoins seeing outflows. Ethereum saw US$9m outflows, while Polygon, Litecoin and Polkadot saw outflows of US$0.9m, US$0.6m and US$0.5m respectively.
Blockchain equities did not escape the negative sentiment, seeing US$6m outflows last week.
Bitcoin prices plummeted dramatically yesterday, underscoring for investors the persistent potential for extreme volatility. While the dip might appear sudden, it was precipitated by a combination of events that contributed to the decline.
Low Volumes and Volatility have led to a market vulnerable to larger trades
In recent months, volatility has decreased, reaching levels comparable to the all-time lows observed at the start of the year. Historically, such levels have often marked turning points for significant price swings, either upward or downward.
Additionally, Bitcoin trading volumes have been notably subdued, possibly influenced by seasonal factors. They averaged US$2.3bn per day, compared to US$2.8bn the previous week on trusted exchanges. This is significantly lower than the yearly average of US$7bn and the 2022 daily average of US$11bn.
Regulatory Actions
Recent price declines can be partly attributed to the SEC’s stringent measures on US crypto exchanges, resulting in a marked drop in trading volumes, especially for stablecoins. Paradoxically, the depreciating US dollar over the past year might have intensified this trend. This is due to diminished interest from investors in holding dollar-pegged stablecoins. The market share of dollar-denominated stablecoins has dwindled from 70% to a mere 50% today.
The surge in June, spurred by BlackRock’s application for SEC approval of a Bitcoin ETF, led to a noticeable spike in prices. However, markets are now coming to terms with the realisation that an immediate SEC approval for a Bitcoin ETF in the US is unlikely. It’s noteworthy that current Bitcoin prices have stabilised around levels observed before this announcement.
From our latest fund manager survey, we understand that investors are highly attuned to regulatory decisions, ranking it as their key concern. This will likely continue to be a pressing issue until there’s clear regulation for a spot Bitcoin ETF and a well-established regulatory framework for digital assets in the US, akin to MiCa in Europe.
Concerns over China
Over the last two years, China’s property sector has been ensnared in a deepening debt crisis, precipitated by the government’s efforts to curb skyrocketing debt. Numerous developers have defaulted on payments, grappling with challenges in selling apartments and securing financing. While stimulus measures provide some relief, they can’t fully counteract the intensifying structural deceleration of the economy. Although this scenario may not culminate in a full-blown economic crash, it’s poised to continually hamper economic growth, given the property sector’s pivotal role (constituting 25% of the economy) in driving growth over previous decades.
The economic horizon appears bleak. Last month, bank loans plummeted to their lowest in 14 years, deflation is gaining ground, and exports are in decline. One of China’s preeminent property developers teeters on the brink of default. Moreover, a financial conglomerate, overseeing 1 trillion yuan (US$138 billion) in assets, failed to meet payments on investment products, igniting concerns over potential contagion. While we consider a full financial meltdown unlikely, should it transpire, it might bolster Bitcoin, especially if the repercussions permeate the broader financial sector.
The Bitcoin price maybe indicative for a potential crash in other asset classes.
10-year US treasuries recently hit their highest level in 16 years while many leading economic indicators suggest economic growth globally is looking shaky. Bitcoin has often been the first to act in recent years, so this may be indicative of a broader crash in other asset classes. The bond markets have been persistent in their worries over economic growth, as indicated by the 10–2 yield curve.
Futures Positioning
Recent data from a diverse range of exchanges indicates a net long positioning for Bitcoin in the futures market over the past few months. This prolonged stability might have bred a sense of complacency among investors. However, a significant unwinding of these positions occurred last night, amplifying the decline in prices. Current sentiment remains bearish, as evidenced by the negative funding rates which suggest traders’ inclination to short.
Elon Musk
In another development, SpaceX reported a markdown of US$373m in its Bitcoin holdings yesterday. History shows that the market often reacts sharply to Elon Musk’s actions, implying that this latest revelation could further dampen investor sentiment.
The outlook for the markets in the forthcoming months presents a blend of opportunities and challenges. It’s anticipated that the US Federal Reserve will refrain from hiking rates further in September. Insights into their stance will be clearer during the Jackson Hole Economic Policy Symposium scheduled for 24th-26th August. A dovish shift is expected, which could bolster Bitcoin’s prospects. On the flip side, investors are eagerly awaiting the SEC’s verdict on the Grayscale ETF and Blackrock applications in September. Anticipations are that decisions on both applications might be postponed, potentially leading to investor disappointment.
The information contained in this document is for general information only. Nothing in this document should be interpreted as constituting an offer of (or any solicitation in connection with) any investment products or services by any member of the CoinShares Group where it may be illegal to do so. Access to any investment products or services of the CoinShares Group is in all cases subject to the applicable laws and regulations relating thereto.
This document is directed at professional and institutional investors. Investments may go up or down in value and you may lose some or all of the amount invested. Past performance is not necessarily a guide to future performance. This document contains historical data. Historical performance is not an indication of future performance and investments may go up and down in value. You cannot invest directly in an index. Fees and expenses have not been included.
Although produced with reasonable care and skill, no representation should be taken as having been given that this document is an exhaustive analysis of all of the considerations which its subject-matter may give rise to.This document fairly represents the opinions and sentiments of CoinShares, as at the date of its issuance but it should be noted that such opinions and sentiments may be revised from time to time, for example in light of experience and further developments, and this document may not necessarily be updated to reflect the same.
The information presented in this document has been developed internally and / or obtained from sources believed to be reliable; however, CoinShares does not guarantee the accuracy, adequacy or completeness of such information. Predictions, opinions and other information contained in this document are subject to change continually and without notice of any kind and may no longer be true after the date indicated. Third party data providers make no warranties or representation of any kind in relation to the use of any of their data in this document. CoinShares does not accept any liability whatsoever for any direct, indirect or consequential loss arising from any use of this document or its contents.
Any forward-looking statements speak only as of the date they are made, and CoinShares assumes no duty to, and does not undertake, to update forward-looking statements. Forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time. Nothing within this document constitutes (or should be construed as being) investment, legal, tax or other advice. This document should not be used as the basis for any investment decision(s) which a reader thereof may be considering. Any potential investor in digital assets, even if experienced and affluent, is strongly recommended to seek independent financial advice upon the merits of the same in the context of their own unique circumstances.
This document is directed at, and only made available to, professional clients and eligible counterparties. For UK investors: CoinShares Capital Markets (UK) Limited is an appointed representative of Strata Global Limited which is authorised and regulated by the Financial Conduct Authority (FRN 563834). The address of CoinShares Capital Markets (UK) Limited is 1st Floor, 3 Lombard Street, London, EC3V 9AQ. For EU investors: CoinShares AM (napoleon-am.com) is a French asset management company regulated by the Autorité des Marchés Financiers (AMF), registered under number GP-19000015 since 27/03/2019. Its office is located at 25 rue du 4 Septembre, 75002 Paris, France.
Why Bitcoin just Plummeted was originally published in CoinShares Blog on Medium, where people are continuing the conversation by highlighting and responding to this story.
Digital asset investment products saw inflows this week totalling US$29m, likely due to the recent US inflation data, which was slightly below expectations, signifying that a September rate hike is less likely.
Bitcoin was the primary focus, seeing US$27m inflows, which follows 3 prior weeks of outflows totalling US$144m.
XRP saw US$0.5m inflows and is now on a 16-week run of inflows, while AuM has risen 127% since the beginning of the year.
Digital asset investment products saw inflows this week totalling US$29m following a three-week run of outflows. We believe the improved sentiment is due to the recent US inflation data, which was slightly below expectations, signifying that a September rate hike is less likely.
Regionally, most of the activity was in Canada, which saw US$24m inflows, although from a YTD perspective it remains well behind other countries. Switzerland was the only other country to see substantive inflows which totalled US$8m.
Bitcoin was the primary focus, seeing US$27m inflows, which follows 3 prior weeks of outflows totalling US$144m. Short-bitcoin, following a week of very minor inflows (US$2k), resumed its run of outflows of US$2.7m last week, and unusually being the only asset to see outflows. This data suggests that sentiment for Bitcoin and the broader crypto market remains supportive despite the seasonally low volumes.
Ethereum led the altcoins, seeing US$2.5m inflows, while Uniswap and Solana saw inflows of US$0.7m, and US$0.4m respectively.
XRP saw US$0.5m inflows and is now on a 16-week run of inflows, representing 12% of assets under management (AuM). XRP’s AuM has risen 127% since the beginning of the year.
Digital asset investment products saw outflows this week, totalling US$107m with profit taking gathering pace in recent weeks.
Bitcoin was again the primary focus, seeing outflows totalling US$111m, the largest weekly outflows since March.
Altcoins sentiment seems to be improving though and offset the outflows in Bitcoin and Ethereum. Solana saw the largest inflows, totalling US$9.5m.
Digital asset investment products saw outflows this week, totalling US$107m with profit taking gathering pace in recent weeks. The summer doldrums are in full force with weekly trading volumes in investment products 36% below the year-to-date average, but in the broader on-exchange market volumes have suffered more, down 62% relative to the YTD average.
Regionally, the outflows were focussed on tw!o ETP providers in Germany and Canada, which saw US$71m and US$29m in outflows respectively.
Bitcoin was again the primary focus, seeing outflows totalling US$111m, the largest weekly outflows since March, when US regulatory scrutiny began escalating. For the first time in 14 weeks, the outflows into short bitcoin have stopped.
Ethereum saw outflows totalling US$6m, bringing total outflows in both Bitcoin and Ethereum to US$117m last week.
Altcoins sentiment seems to be improving though and offset the outflows in Bitcoin and Ethereum. Solana saw the largest inflows, totalling US$9.5m, the largest single week of inflows since March 2022.
Other notable mentions were XRP and Litecoin, with inflows of US$0.5m and US$0.46m respectively. Uniswap and Cardano saw outflows of US$0.8m and US$0.3m respectively.
At the half year mark, digital assets have seen just under US$0.5bn of inflows
93% of the outflows were from long-Bitcoin investment products, while short-Bitcoin saw its 14th consecutive week of outflows totalling US$3.1m.
This suggests investors have been taking profits in recent weeks, with the sentiment for the asset overall remaining supportive.
Investors are favouring altcoins (less Ethereum), with inflows last week totalling US$3m, and for the last 8 weeks seeing inflows totalling US$19m.
Digital asset investment products saw minor outflows totalling US$21m last week. Trading volumes for digital asset investment products were low at US$915m for the week, compared to the US$1.5bn weekly average this year so far. This was reflected in the broader Bitcoin market, which saw a total of US$16bn traded last week on trusted exchanges, compared to the weekly average this year of US$52bn. At the half year mark, digital assets have seen just under US$0.5bn of inflows.
Regionally, the negative sentiment was primarily focussed on North America, seeing outflows of US$11bn from both the US and Canada. Germany saw inflows of US$5m, while Switzerland and Sweden saw outflows of US$3.2m and US$2.6m respectively.
93% of the outflows were from long-Bitcoin investment products, while short-Bitcoin saw its 14th consecutive week of outflows totalling US$3.1m. This suggests investors have been taking profits in recent weeks, with the sentiment for the asset overall remaining supportive.
Investors are favouring altcoins (less Ethereum), with inflows last week totalling US$3m, and for the last 8 weeks seeing inflows totalling US$19m. Cardano, Solana and XRP saw the largest inflows totalling US$0.64m, US$0.6m and US$0.5m respectively.
Ethereum and Avalanche saw minor outflows totalling US$1.9m and US$0.4m respectively.
Minor outflows in Bitcoin, investors favouring Ethereum
Digital asset investment products saw minor outflows totalling US$6.5m, following 4 prior weeks of inflows that totalled US$742m.
Bitcoin was the primary focus, as has recently been the case, seeing US$13m of outflows, while short bitcoin investment products saw outflows for the 13th consecutive week totalling US$5.5m.
Ethereum topped the leaderboard last week, seeing US$6.6m inflows, suggesting sentiment, which has been poor this year, is slowly beginning to turn around.
Digital asset investment products saw minor outflows totalling US$6.5m, following 4 prior weeks of inflows that totalled US$742m. Trading volumes last week were below the year weekly average at US$1.2bn compared to US$2.4bn the prior week. The minor negative sentiment was primarily focussed on the North American market, seeing 99% of (US$21m) outflows. This was offset by US$12m inflows into Switzerland and US$1.9m into Germany.
Bitcoin was the primary focus, as has recently been the case, seeing US$13m of outflows, while short bitcoin investment products saw outflows for the 13th consecutive week totalling US$5.5m. Short bitcoin total assets under management (AuM) at its peak represented 1.3% of total bitcoin investment products, this has now fallen to just 0.4%, the lowest level since June 2022.
Ethereum topped the leaderboard last week, seeing US$6.6m inflows, suggesting sentiment, which has been poor this year, is slowly beginning to turn around.
XRP, both prior to, and following the conclusion of the recent SEC lawsuit, has seen inflows totalling US$6.8m over the last 11 weeks representing 8% of AuM. This implies investors are increasingly confident in the outlook for XRP.
Solana, Uniswap and Polygon saw inflows totalling US$1.1m, US$0.7m and US$0.7m respectively.
US$742m inflows over the last 4 weeks, investors maintain focus on Bitcoin
Digital asset investment products saw US$137m of inflows last week. Following a few late updates to prior weekly data, inflows for the last 4 weeks now total US$742m, representing the largest run of inflows since the final quarter of 2021.
Bitcoin saw inflows totalling US$140m, comprising 99% of all inflows. While short bitcoin investment products saw a 12th week of outflows of US$3.2m.
The recent price appreciation in Ethereum has not been followed with inflows, with US$2m outflows last week, remaining the asset with the most outflows year-to-date.
Digital asset investment products saw US$137m of inflows last week. Following a few late updates to prior weekly data, inflows for the last 4 weeks now total US$742m, representing the largest run of inflows since the final quarter of 2021. Trading volumes on investment products remain well above the year average of US$1.4bn, totalling US$2.3bn for last week. The volumes are currently making up a far greater proportion of total crypto volumes, comprising 11% last week compared to the 2% average.
Regionally, the inflows were focussed almost solely on North America, with inflows of US$109m and US$28m in the US and Canada respectively. While minor outflows were seen in Europe with the exception of minor inflows in Switzerland.
Bitcoin saw inflows totalling US$140m, comprising 99% of all inflows. While short bitcoin investment products saw a 12th week of outflows of US$3.2m. A combination of recent price appreciation and outflows have seen short bitcoin total assets under management fall from their April US$198m peak to just US$55m.
The recent price appreciation in Ethereum has not been followed with inflows, with US$2m outflows last week, remaining the asset with the most outflows year-to-date. Altcoins, Solana, Polygon and Litecoin saw minor inflows of between US$0.5m, US$0.5m and US$.3m respectively.
Inflows of US$136m, but seasonal low volumes kick in
Digital asset investment products saw US$136m of inflows last week bringing the last 3 consecutive weeks inflows to US$470m, fully correcting the prior 9 weeks of outflows
Bitcoin remains the focus amongst investors, with inflows totalling US$133m last week, while short-bitcoin saw outflows of US$1.8m.
Blockchain equities saw the largest inflows for a year, totalling US$15m.
Digital asset investment products saw US$136m of inflows last week bringing the last 3 consecutive weeks inflows to US$470m, fully correcting the prior 9 weeks of outflows, bringing year-to-date flows to a net positive US$231m. Trading turnover has slowed though, with investment products totalling US$1bn for the week compared to US$2.5bn average in the prior 2 weeks. These lower volumes may be due to the seasonal effects, where lower volumes are typically seen during July and August.
Bitcoin remains the focus amongst investors, with inflows totalling US$133m last week, while short-bitcoin saw outflows of US$1.8m, its 11th consecutive week, further demonstrating investors favour the asset over altcoins at present.
Ethereum saw inflows totalling US$2.9m last week, but has only marginally benefitted from improved investor sentiment. The last 3 weeks of inflows represent just 0.2% of total assets under management (AuM) compared to Bitcoin’s 1.9%, and remains in a negative net flows position year-to-date of US$63m. Despite this, short-Ethereum did see minor outflows of US$0.3m.
A range of altcoins saw inflows into Solana, XRP, Polygon, Litecoin & Aave, while both Cosmos and Cardano saw minor outflows.
Blockchain equities saw the largest inflows for a year, totalling US$15m.
Digital asset investment products saw a second week of inflows totalling US$125m, bringing the last two weeks of inflows to US$334m, representing almost 1% of total assets under management (AuM).
Bitcoin remained the primary focus of investors, seeing inflows of US$123m, with the last 2 weeks inflows representing 98% of all digital asset flows.
Short-bitcoin investment products continued to see outflows totalling US$0.9m, representing its 10th week of outflows.
Digital asset investment products saw a second week of inflows totalling US$125m, bringing the last two weeks of inflows to US$334m, representing almost 1% of total assets under management (AuM). Recent price appreciation saw AuM rise to US$37bn during the week, the highest point since early June 2022 and matching the average AuM for 2022. Trading activity remained high at US$2.3bn for the week, well above the US$1.5bn year-to-date average.
Bitcoin remained the primary focus of investors, seeing inflows of US$123m, with the last 2 weeks inflows representing 98% of all digital asset flows. Bitcoin investment products are now back to a net inflow year-to-date having been in a net outflow position of US$171m just 2 weeks ago. Despite recent price appreciation, short-bitcoin investment products continued to see outflows totalling US$0.9m, representing its 10th week of outflows which now represent 59% of AuM. Despite this recent bearishness for short-bitcoin, it remains the second best performing asset in terms of inflows year-to-date at US$60m.
A selection of altcoins saw minor inflows, Ethereum led with inflows totalling US$2.7m, followed by Cardano, Polygon and XRP. Multi-asset and Solana saw minor outflows of US$1.8m and US$0.8m respectively.
Blockchain equities saw inflows of US$6.8m following a 9-week run of outflows.
Largest inflows for a year totalling US$199m following US ETF applications
Digital asset investment products saw the largest single weekly inflows since July 2022, totalling US$199m, correcting almost half of the prior 9 consecutive weeks of outflows.
Bitcoin was the primary beneficiary, seeing US$187m inflows last week, representing 94% of the total flows. Short-bitcoin saw outflows for the 9th consecutive week totalling US$4.9m.
This turn in sentiment didn’t trickle down to altcoins with only very minor inflows.
Digital asset investment products saw the largest single weekly inflows since July 2022, totalling US$199m, correcting almost half of the prior 9 consecutive weeks of outflows. While ETP trading volumes were 170% the average this year, totalling US$2.5bn for the week.
We believe this renewed positive sentiment is due to recent announcements from high profile ETP issuers that have filed for physically backed ETFs with the US Securities & Exchange Commission. Total assets under management (AuM) are now at US$37bn, their highest since before the collapse of 3 Arrows Capital.
Bitcoin was the primary beneficiary, seeing US$188m inflows last week, representing 94% of the total flows. Short-bitcoin saw outflows for the 9th consecutive week totalling US$4.9m, with all 9 week’s outflows representing 60% of total AuM.
Ethereum saw inflows of US$7.8m, representing just 0.1% of AuM relative to Bitcoin’s inflows at 0.7%, suggesting appetite for Ethereum is lower than Bitcoin at present.
This turn in sentiment didn’t trickle down to altcoins with only very minor inflows into XRP and Solana totalling US$0.24m and US$0.17m respectively. But the improved sentiment did encourage some investors to buy multi-asset investment ETPs, with US$8m inflows last week.
Digital asset investment products saw minor outflows totalling US$5.1m. The end of the week saw minor inflows following the news that one of the world’s largest asset managers has applied for Bitcoin ETP in the US.
Despite improving regulatory conditions in Hong Kong, we have not seen any measurable inflows into ETPs year — to-date.
The prior week crash in altcoin prices prompted investors to add to positions, with inflows totalling US$2.4m.
Digital asset investment products saw minor outflows totalling US$5.1m. The end of the week saw minor inflows following the news that one of the world’s largest asset managers has applied for a Bitcoin ETP in the US, although these inflows were not enough to offset outflows seen earlier in the week. Consequently, a 9th week of outflows was recorded, with this run of outflows now totalling US$423m.
Regionally, the US and Germany saw minor inflows of US$3.7m and US$2.4m respectively. Looking at total inflows year-to-date, the US remains on top with inflows of US$147m, while Canada lags with outflows of US$277m. Despite improving regulatory conditions in Hong Kong, we have not seen any measurable inflows into ETPs year — to-date while total assets under management (AuM) remain low at US$39m.
The prior week crash in altcoin prices prompted investors to add to positions, with inflows totalling US$2.4m, with XRP, Cardano and Polygon being the focus, seeing inflows of US$1m, US$0.6m and US$0.2m respectively.
Ethereum saw the largest outflows for the week totalling US$5m, while both Tron and Avalanche saw outflows of US$0.4m.
Blockchain equities saw the largest outflows since FTX, totalling US$12.3m.
Crypto Has Already Happened — Comprehensive, Clear, and Transparent Legislation is Imperative in the US.
By Jean-Marie Mognetti, CoinShares CEO
The Democratic Principle: Legislating for Progress
In the land of the free, one of the primary roles of the legislative bodies is to put forth policies reflective of the populace’s needs and aspirations. The emergence of cryptocurrencies calls for such advancement. Recent legislative proposals by Republican members of Congress reflect this changing tide — these initiatives strive to legitimise and regulate the burgeoning influence of cryptocurrencies in our financial landscape. However, in a recent Financial Times op-ed titled Congress should stop trying to make crypto happen, the author denigrates these proposals as propping up the crypto industry. This standpoint seems to bypass the democratic principle of the ‘rule of law’, which mandates our societal norms and economic paradigms to encompass emerging sectors such as cryptocurrencies, to secure our citizens and steer societal progress. The Securities and Exchange Commission’s (SEC) failure to provide clear guidelines has placed American crypto players in a precarious position, underlining the urgent need for effective legislative action.
A New Asset Class: Acknowledging the Distinctive Nature of Cryptocurrencies
Cryptocurrency and blockchain technology signify a paradigm shift in our perception and management of assets, analogous to how the advent of the internet revolutionised communication. Digital assets are unlike their traditional counterparts, straddling multiple categories. They could represent shares, where the user invests in a project, serve as energy to perform an action (e.g., gas fees on Ethereum), function as a currency to carry out a transaction (sending Bitcoin through the Lightning Network to someone else), act as a token to automatically reward community engagement, or even form a type of digital contract through smart contracts. The rise of digital assets has catalysed a surge in innovative business models, reshaping conventional market structures and paving the way for unprecedented growth and wealth creation especially by simplifying the finance paradigm through disintermediation. In the face of this novel asset class, it’s imperative to construct a bespoke legislative framework akin to the EU’s Markets in Crypto Assets (MiCA) regulation. MiCA acknowledges the unique nature of cryptocurrencies and lays down clear rules that uphold legal certainty, bolster innovation, and safeguard consumers.
Investor Protection: The Need for Clear and Transparent Rules
Cryptocurrency has been here since 2009 with the advent of Bitcoin. As the author William Gibson eloquently put it, “The future is already here — it’s just not very evenly distributed.” Hence, the challenge is not about making crypto happen; it’s already happening. What is at stake here is providing clear and comprehensive regulation to ensure the safe and sustainable growth of this new financial ecosystem. Protecting investors is of the utmost importance, and achieving this necessitates clear and transparent rules. The crypto world is a sophisticated and intricate ecosystem with a range of assets, stakeholders, and infrastructures on par with traditional finance. Therefore, the rules governing it should be as nuanced and reflective of its complexity.
The Value of Crypto: Let Investors Decide
When it comes to the value of a new type of asset like cryptocurrencies, it is not up to regulatory agencies to decree its worth or usefulness. Just as with traditional assets, the value is determined by market dynamics and the consensus of users and investors. Much like gold, whose value is not solely derived from its physical properties but from the trust that people place in it as a store of value, cryptocurrencies derive their worth from the trust and belief of millions of participants worldwide. These participants see tangible benefits and potential in cryptocurrencies, whether as a decentralised digital currency, a hedge against inflation, a platform for decentralised applications, or a mechanism for automatically rewarding community engagement. Thus, the value and future of cryptocurrencies should be left to the market to decide, not regulatory bodies.
Conclusion: Legislating for the Future
The aim is not to blindly advocate for digital assets but to nurture an environment that encourages their responsible growth while protecting consumers and preserving market integrity. Legislation should mirror our economic systems’ evolving nature. As digital assets become increasingly critical to our financial landscape, our regulatory framework must adapt accordingly. The legislative proposals put forward by Republican members of Congress could serve as a strong foundation for this evolution. As we venture into the future, let us cultivate a legal environment that welcomes innovation instead of stifling it, providing a fair and equal platform for all. It’s time to acknowledge that crypto is already here; now it’s time to ensure it’s effectively regulated.
8th Consecutive week of outflows, altcoins faring better this year
Digital asset investment products saw outflows totalling US$88m, bringing this 8-week run of outflows to US$417m. We believe that this is monetary policy related, with currently no clear end in sight to interest rate rises, leaving investors cautious.
Ethereum saw outflows of US$36m, the largest single week of outflows since the Merge.
Altcoins have seen inflows year-to-date, in stark contrast to Bitcoin and Ethereum.
Digital asset investment products saw outflows totalling US$88m, bringing this 8-week run of outflows to US$417m, closing in on the record 12 week run of outflows seen in April to June last year. We believe, like last year, that this is monetary policy related, with currently no clear end in sight to interest rate rises, leaving investors cautious.
87% of the outflows were focussed on one provider, accordingly almost all the outflows were North America based. Minor inflows of US$9.2m were seen in Switzerland, while Germany saw outflows of US$9.4m.
Bitcoin saw outflows totalling US$52m, with this 8-week run of outflows totalling US$254m, representing 1.2% of total assets under management (AuM). Short-bitcoin saw US$1.1m outflows, with its 7-week run of outflows representing 44% of AuM.
Ethereum saw outflows of US$36m, the largest single week of outflows since the Merge in September last year, although has fared relatively better than Bitcoin seeing total outflows representing only 0.6% of AuM.
Altcoins saw mixed fortunes, with minor inflows into Litecoin, XRP and Solana and outflows form Polygon. Interestingly, on aggregate, altcoins have seen inflows year-to-date (except Tron), in stark contrast to Bitcoin and Ethereum.
Two Visions for Crypto (by Townsend Lansing, Nick Du Cros and Benoit Pellevoizin)
As a leading force in the global digital asset management sphere, CoinShares is attentively monitoring the recent allegations made by the U.S. Securities and Exchange Commission (SEC) against prominent cryptocurrency exchanges, Binance and Coinbase. These potentially landmark charges could significantly shape the trajectory of crypto in the United States.
Two Continents — Two Visions: EU vs USA
These unfolding legal developments surface amidst a stark divergence in regulatory developments between the European Union and the United States.
The EU, armed with the MiCA (Markets in Crypto-Assets) framework scheduled to commence in late 2024, has chosen to acknowledge digital assets as a new class of assets. This stance mirrors an intricate understanding of digital assets’ unique attributes, while simultaneously supporting innovators striving for regulatory compliance, even when past efforts have been less than perfect.
As a contrast, without political guidance, the U.S. approach is being driven by the SEC and state regulators, endeavouring to place digital assets within pre-existing regulatory structures, such as securities or commodities. This approach seems less forgiving of past non-compliant behaviours, notwithstanding the hitherto lack of clarity within the regulatory environment. The lawsuits against Binance and Coinbase, and let’s not forget the on-going Ripple/XPR litigation, can be viewed as an embodiment of this differing regulatory philosophy.
Critical Scrutiny: Binance & Coinbase
The serious allegations against Binance, Binance.US, and their executive Changpeng Zhao (CZ), including offering unregistered securities and violating securities law, necessitate thorough examination. Likewise, the charges against Coinbase, encompassing registration and custody issues, will critically influence how the United States comprehends and regulates cryptocurrency exchanges and custodians.
Of particular interest is how the SEC is weaponising Coinbase’s marketing efforts as part of this lawsuit, highlighting the need for explicit definitions and standards within the crypto industry. The SEC’s case implies that cryptocurrency platforms should be regulated commensurate with their operational roles within the financial ecosystem.
While the lawsuit seems to carry more severe implications for Binance, the potential impact on Coinbase and the broader crypto industry is significant. The charges insinuate that a majority of crypto assets should be categorised as securities, which would radically modify the regulatory landscape, potentially confining access to regulated Wall Street entities (assuming that they have the appetite once the litigation is over). This shift could potentially place the control of the crypto industry firmly within the grasp of traditional financial institutions, with profound implications for the promise of innovation and democratisation inherent in blockchain technology.
The Road Ahead: Regulatory Certainty and Beyond
We anticipate regulatory certainty becoming a critical factor for digital asset players. Places like the EU, Switzerland, UAE and Hong Kong which are endeavouring to develop bespoke crypto frameworks.
Given the existing regulatory discrepancies, a volume shift in trading and innovation from the U.S. to jurisdictions with more accommodating regulatory landscapes might be imminent. This shift could have significant economic and strategic repercussions for the U.S. within the burgeoning digital asset space.
This lawsuit and its potential outcomes, while significant, do not spell doom for the crypto industry. Instead, they underscore the critical need for robust regulations to protect investors and maintain market integrity. We believe that clarity and appropriate regulations are vital to carving a sustainable path for the crypto industry.
Looking ahead, we foresee a dichotomy developing in the global crypto landscape. In the U.S., we anticipate that traditional finance, with its existing regulatory compliance and familiarity, is poised to assume a commanding role in the crypto sector. The regulatory restrictions are likely to mould the crypto industry in such a way that it could potentially mirror the existing financial system, with its well-established regulations and institutions.
On the other hand, in the EU and other countries developing a bespoke framework for crypto, our outlook is that innovative, crypto-native financial entities are likely to continue flourishing and shaping the future of the finance industry. These emerging entities, armed with novel technologies and nurtured by a more permissive regulatory environment, are poised to drive significant advancements and disruption in global finance. This regulatory arbitrage is evident in the data, where we are seeing a shift away from the U.S., having seen market share of spot Bitcoin & Ethereum volumes fall from 85% at the start of 2023 to 70% today. It is reasonable to expect this trend to continue.
CoinShares remains steadfast in our commitment to contributing to these pivotal discussions and collaborating with regulators to nurture a transparent, secure, and equitable crypto ecosystem.
Disclosure
The information contained in this document is for general information only. Nothing in this document should be interpreted as constituting an offer of (or any solicitation in connection with) any investment products or services by any member of the CoinShares Group where it may be illegal to do so. Access to any investment products or services of the CoinShares Group is in all cases subject to the applicable laws and regulations relating thereto.
This document is directed at professional and institutional investors. Investments may go up or down in value and you may lose some or all of the amount invested. Past performance is not necessarily a guide to future performance. This document contains historical data. Historical performance is not an indication of future performance and investments may go up and down in value. You cannot invest directly in an index. Fees and expenses have not been included.
Although produced with reasonable care and skill, no representation should be taken as having been given that this document is an exhaustive analysis of all of the considerations which its subject-matter may give rise to.This document fairly represents the opinions and sentiments of CoinShares, as at the date of its issuance but it should be noted that such opinions and sentiments may be revised from time to time, for example in light of experience and further developments, and this document may not necessarily be updated to reflect the same.
The information presented in this document has been developed internally and / or obtained from sources believed to be reliable; however, CoinShares does not guarantee the accuracy, adequacy or completeness of such information. Predictions, opinions and other information contained in this document are subject to change continually and without notice of any kind and may no longer be true after the date indicated. Third party data providers make no warranties or representation of any kind in relation to the use of any of their data in this document. CoinShares does not accept any liability whatsoever for any direct, indirect or consequential loss arising from any use of this document or its contents.
Any forward-looking statements speak only as of the date they are made, and CoinShares assumes no duty to, and does not undertake, to update forward-looking statements. Forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time. Nothing within this document constitutes (or should be construed as being) investment, legal, tax or other advice. This document should not be used as the basis for any investment decision(s) which a reader thereof may be considering. Any potential investor in digital assets, even if experienced and affluent, is strongly recommended to seek independent financial advice upon the merits of the same in the context of their own unique circumstances.
This document is directed at, and only made available to, professional clients and eligible counterparties. For UK investors: CoinShares Capital Markets (UK) Limited is an appointed representative of Strata Global Limited which is authorised and regulated by the Financial Conduct Authority (FRN 563834). The address of CoinShares Capital Markets (UK) Limited is 82 Baker Street, London, W1U 6TE. For EU investors: CoinShares AM (napoleon-am.com) is a French asset management company regulated by the Autorité des Marchés Financiers (AMF), registered under number GP-19000015 since 27/03/2019. Its office is located at 25 rue du 4 Septembre, 75002 Paris, France.
SEC vs Binance and Coinbase was originally published in CoinShares Blog on Medium, where people are continuing the conversation by highlighting and responding to this story.
