The cryptocurrency market has seen substantial outflows over the last nine weeks, with investors withdrawing close to half a billion dollars from crypto products.
The past week alone witnessed outflows totaling $54 million, marking the fifth consecutive week of selloffs, Bloomberg reported Monday (Sept. 18), citing data from CoinShares. Notably, bitcoin accounted for 85% of these outflows, amounting to $45 million.
Despite recent crypto sector victories against the U.S. Securities and Exchange Commission and the filing of new bitcoin exchange-traded fund (ETF) applications, the crypto market has failed to gain momentum, according to the report. This lack of positive price action has raised concerns among investors, leading to the withdrawal of funds from the market.
Matt Maley, chief market strategist at Miller Tabak + Co., highlighted the disappointment among investors regarding the crypto market’s performance despite the positive news it has received in recent months, the report said. The absence of a significant rally in bitcoin and other cryptocurrencies has dampened investor sentiment.
However, amid the challenges, there have been some positive developments, per the report. Bitcoin recorded its first weekly gain since August last week, following a four-week decline. The cryptocurrency experienced a modest 2% increase in value. Interestingly, this gain coincided with bitcoin’s renewed correlation with technology stocks.
While bitcoin displayed a slight recovery, other cryptocurrencies faced difficulties, according to the report. Ethereum, despite its attractive investment fundamentals and high demand for staking yield, witnessed outflows totaling $4.8 million last week. Alternative coins like Binance and Polygon also experienced minor outflows, each amounting to $300,000.
Maley suggests that institutional investors are now diversifying their portfolios beyond cryptocurrencies, seeking asset classes that can deliver strong performance in the final months of the year, the report said.
When bitcoin dipped to a two-month low in August, the decline was attributed to a broader crypto market slump triggered by news that Elon Musk’s SpaceX had written down the value of its bitcoin holdings by $373 million and subsequently sold off its crypto assets.
While that was the immediate catalyst for the sell-off in August, analysts said the broader driver is the risk-averse sentiment prevailing in global markets, affecting various asset classes, together with low volatility and a lack of enthusiasm from retail investors.