What Signal? Cryptocurrency Funds Witness Major Withdrawals for Two Consecutive Weeks

Global cryptocurrency funds have seen outflows for the second consecutive week, indicating a decline in demand for exchange-traded funds (ETFs) in cryptocurrencies.

Source: Bloomberg

According to the latest report by CoinShares International Ltd., this phenomenon is partly due to the market's widespread expectation that the Federal Reserve will maintain higher interest rates for an extended period.

In the week ending April 19, a total of $206 million flowed out from global cryptocurrency funds. Especially in the U.S., ETFs faced a withdrawal of $244 million, primarily focused on the existing funds in the market. Although new ETFs continue to attract investments, the inflow has significantly decreased compared to previous weeks.

CoinShares' report suggests that this investor behavior may reflect concerns over the Federal Reserve possibly maintaining high interest rates for a long time.

The report states that the spot Bitcoin ETF in the U.S., which was approved by the Securities and Exchange Commission earlier this year, began trading and saw an outflow of $192 million this week. Analysts noted that the market's response to this new product indicates a lack of interest among investors in using this tool for shorting Bitcoin. “However, few investors see this as an opportunity to short.”

After Bitcoin's halving was completed last Friday, related stocks generally increased on Monday. Riot Platforms, a Bitcoin mining company, ended up 23.11% higher, while MicroStrategy, the listed company holding the most Bitcoin, rose by 12.77%, and Coinbase, the largest cryptocurrency exchange in the U.S., increased by over 7%.

Prior to this, cryptocurrency-related stocks had experienced outflows for the 11th consecutive week, totaling $9 million. Analysts believe this reflects the market's concerns about the potential adverse impact on mining companies due to the cryptocurrency halving event.

On the other hand, funds holding Ethereum have also experienced outflows for six consecutive weeks, with a total of $34.2 million leaving this week.

Moreover, the report also mentioned the long-term impact of Bitcoin's "halving" on the market, an event that occurs every four years and is designed to halve the quantity of new Bitcoin being produced, thereby affecting miners' earnings. Although the halving may have a boosting effect on Bitcoin prices, its direct impact on mining operations continues to unsettle many investors.

Overall, despite some ETF products still seeing inflows, the continued outflow of funds from cryptocurrency funds and related stocks indicates a cautious outlook on the cryptocurrency environment in the coming months.