Executive Summary
- Global crypto ETPs recorded $1.43 billion in outflows last week, marking their largest losses since March and ending a two-week inflow streak.
- The significant outflows coincided with price declines in Bitcoin and Ether, driven by “polarized” investor sentiment concerning US monetary policy and Federal Reserve actions.
- Despite overall outflows, Ether demonstrated greater resilience with a mid-week recovery and month-to-date inflows, contrasting with Bitcoin ETPs which saw over $1 billion in outflows.
The Story So Far
- The recent significant outflows and price declines in crypto ETPs were primarily driven by “polarized” investor sentiment concerning US monetary policy, with initial pessimism about the Federal Reserve’s stance causing large withdrawals before a perceived dovish shift from Federal Reserve Chair Jerome Powell at the Jackson Hole Symposium led to a partial recovery, simultaneously revealing a divergence in investor preference with Ether showing more resilience compared to Bitcoin.
Why This Matters
- The substantial $1.43 billion outflow from crypto ETPs, the largest since March, signals a sharp reversal in investor sentiment and heightened market volatility, primarily driven by uncertainty surrounding US monetary policy. This trend underscores the crypto market’s sensitivity to macroeconomic factors and highlights a notable divergence in investor confidence, with Ether demonstrating more resilience and attracting month-to-date inflows compared to Bitcoin, suggesting a potential shift in asset preference within the digital asset space.
Who Thinks What?
- CoinShares’ Head of Research, James Butterfill, attributes the significant crypto ETP outflows to “polarized” investor sentiment regarding US monetary policy, noting an initial pessimism followed by a more dovish interpretation of Federal Reserve Chair Jerome Powell’s remarks. He also highlights a divergence in investor behavior, with Ether showing greater resilience compared to Bitcoin.
- Investors initially reacted to the Federal Reserve’s stance with pessimism, leading to substantial outflows from crypto ETPs early in the week.
- Later in the week, investors interpreted Federal Reserve Chair Jerome Powell’s address as more dovish than anticipated, sparking subsequent inflows into crypto products, particularly Ether.
Global crypto exchange-traded products (ETPs) experienced significant outflows totaling $1.43 billion last week, marking their largest losses since March, according to CoinShares’ Head of Research, James Butterfill. This substantial reversal ended a two-week inflow streak that had brought in $4.3 billion, occurring as both Bitcoin and Ether saw notable price declines amid “polarized” investor sentiment regarding US monetary policy.
Market Downturn and Price Movements
The outflows coincided with a dip in Bitcoin’s price, which fell from above $116,000 on August 18 to $112,000 by the end of the trading week. Ether also faced a downturn, tumbling below $4,100 on Tuesday after starting the week at approximately $4,250.
Last week’s losses included the second-biggest outflows on record for spot Ether exchange-traded funds (ETFs), with nearly $430 million withdrawn on Tuesday alone. Bitcoin ETPs saw even larger outflows, exceeding $1 billion during the period.
Shifting Investor Sentiment
Butterfill attributed the widespread sell-off to “increasingly polarized” investor sentiment concerning US monetary policy. Initial pessimism surrounding the Federal Reserve’s stance reportedly drove $2 billion in outflows early in the week.
However, sentiment shifted later in the week following Federal Reserve Chair Jerome Powell’s address at the Jackson Hole Symposium. His remarks were widely interpreted as more dovish than anticipated, sparking a subsequent inflow of $594 million into crypto products.
Diverging Bitcoin and Ether Trends
The shift in sentiment was more strongly reflected in Ether, which experienced a sharp mid-week recovery despite still recording $440 million in outflows for the week. Bitcoin ETPs, in contrast, saw significantly larger outflows, totaling more than $1 billion.
The analyst highlighted a notable divergence in investor behavior month-to-date, with Bitcoin experiencing $1 billion in outflows compared to Ether’s $2.5 billion in inflows. Year-to-date, Ethereum’s inflows represent 26% of its total assets under management, significantly higher than Bitcoin’s 11%.
Altcoin flows during the period were mixed, indicating varied performance across the broader cryptocurrency market.
Last week’s significant $1.43 billion outflows from crypto ETPs underscore a period of heightened volatility and shifting investor sentiment, primarily influenced by US monetary policy expectations. While both Bitcoin and Ether experienced price drops and outflows, a notable divergence in investor preference emerged, with Ether demonstrating greater resilience and month-to-date inflows compared to Bitcoin.
