Significant Sell-Off in Crypto Exchange-Traded Products
Recent reports indicate that crypto exchange-traded products (ETPs) have experienced their largest weekly sell-off on record, with investors withdrawing approximately $2.9 billion from these funds, as noted in a CoinShares report released on Monday. This substantial outflow marks a notable shift in investor sentiment following a prolonged period of steady investment in digital asset products.
This latest wave of withdrawals has extended a three-week streak of outflows, bringing the total to around $3.8 billion. James Butterfill, a research analyst at CoinShares, highlighted several factors contributing to this sell-off, including heightened investor concerns stemming from the recent $1.5 billion hack of the crypto exchange Bybit, as well as the Federal Reserve’s increasingly hawkish stance on monetary policy.
Prior to this downturn, crypto investment products had enjoyed an impressive streak of 19 consecutive weeks of inflows, suggesting that some investors are now opting to lock in profits amid rising market uncertainty. Bitcoin (BTC), the largest cryptocurrency by market capitalization, was particularly affected, suffering a loss of $2.6 billion over the past week.
Interestingly, funds that bet against Bitcoin, known as short Bitcoin ETPs, only saw a modest inflow of $2.3 million, indicating that bearish sentiment has not yet fully taken hold among investors. While the majority of assets faced declines, a few managed to defy the trend; Sui (SUI) emerged as the top performer with $15.5 million in inflows, closely followed by XRP (XRP), which also attracted new investments.
In a challenging week for spot Bitcoin ETFs, investors withdrew significant capital from these funds. BlackRock’s iShares Bitcoin Trust (IBIT), recognized as the largest of its kind, experienced a staggering $1.3 billion in outflows, marking the highest weekly withdrawal since its inception. In a similar vein, the open interest in CME Bitcoin futures has seen a sharp decline over the past two weeks, dropping from 170,000 BTC to 140,000 BTC, which signals a potential shift in institutional positioning.
Additionally, the three-month futures annualized rolling basis is currently yielding 7%, which is only slightly higher than the 4% yield offered by short-term U.S. Treasuries, making this trade less appealing for investors. James Van Straten, an analyst at CoinDesk, commented, “This indicates that hedge funds are beginning to unwind their basis trade positions, which represent a net neutral position. With the narrowing spread between futures yields and risk-free returns, traders might be reallocating their capital away from Bitcoin derivatives in favor of safer, more liquid assets.”
Disclaimer: Parts of this article were generated with the assistance of AI tools and have been reviewed by our editorial team to ensure accuracy and adherence to our standards. For more information, please see CoinDesk’s full AI Policy.
