Investors exit crypto investments at record pace

Posted: 28 June 2022 5:05 pm
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Investors are pulling back from digital asset investment products like Bitcoin at a record pace, adding to downward pressure on prices.

Investors are withdrawing their money from digital asset investment products including Bitcoin-linked instruments at a fastest pace on record. Fund managers are bracing for what could be a “crypto winter,” a long period of price stagnation when Bitcoin (BTC) and its peers languish in a bear market.

CoinShares data showed outflows from such investment products, mostly Bitcoin, reached $423 million last week, the largest since it started tracking the movement of funds. Investors poured $15 million into products that bet on the cryptocurrency’s decline, adding to the downward pressure on prices.

The outflows peaked on June 17 and were “likely responsible for Bitcoin’s decline to $17,760 that weekend,” CoinShares said in its weekly report.

Why should you care about fund flows?

Outflows or the withdrawals from such investment products add to mounting evidence of growing negative investor sentiment toward digital assets, particularly in Bitcoin. It also points to a reversal of the trend seen last year when big investors piled into the cryptocurrency as prices climbed to a record.

The increased presence of traditional hedge funds and other large investors in the crypto market boosted liquidity, helping sustain last year’s rally in prices. By the first quarter, about 38% of traditional hedge funds surveyed by PwC said they’ve added digital assets into their portfolio, almost double from a year earlier.

As the bear market persisted, investor interest started to fade, with big fund managers opting to hit the exit to avoid further losses. Their withdrawal from Bitcoin and digital assets could prolong the bear market, signaling more pain for hodlers: crypto slang for those who “hold on for dear life” — and brave the downturn.

Short-sellers profit from Bitcoin’s slump

Inflows into ETFs that bet on Bitcoin’s decline compound the selling pressure. Who can blame them? Those bearish wagers have been profitable.

The ProShares Short Bitcoin Strategy ETF rose 2.4% Tuesday as Bitcoin slipped 1.5%. Since the fund listed last week, it has gained 5.4%, benefiting from the cryptocurrency’s slide.

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Disclaimer: Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may have holdings in the cryptocurrencies discussed.

At the time of publication, Luzi Ann Javier did not own any cryptocurrency

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