The crypto market recently witnessed a significant shift in investor sentiment as crypto funds experienced outflows totaling $600 million in the week ending June 14. This marked a stark contrast to the previous five weeks, where the sector had seen a consistent inflow of funds. The sudden outflows were primarily concentrated in Bitcoin and Solana funds, with the former experiencing a massive $621 million exit.
The outflows can be attributed to a combination of factors, including the price volatility of Bitcoin throughout the week and a more hawkish-than-expected Federal Open Market Committee (FOMC) meeting. The decision to hold interest rates at 5.25%-5.50% on June 11 and 12 led many crypto investors to pull out of the market in favor of more stable assets. The high interest rates introduced an element of risk, prompting investors to seek safer havens.
Unsurprisingly, most of the outflows were from Bitcoin, with $621 million exiting crypto funds that were heavily invested in the leading cryptocurrency. Spot Bitcoin ETFs in the US bore the brunt of these outflows, recording a total of $580 million in exits over the week. The negative sentiment towards Bitcoin was further evidenced by an inflow of $1.8 million into short Bitcoin products, indicating a bearish outlook on the cryptocurrency.
Apart from Bitcoin, other cryptocurrencies also faced challenges during the week. Solana, which had a rough period in terms of price action, saw $0.2 million in outflows from its investment products. Multi-asset investment products also experienced outflows totaling $1.1 million, reflecting a broader trend of investor caution in the crypto market.
The combination of outflows and reduced trading volume had a significant impact on the total assets under management (AuM) in the crypto sector. From over $100 billion, the AuM fell to $94 billion over the week, indicating a loss of investor confidence in the market. The average trading volume of $11 billion for the week was substantially lower than the yearly average of $22 billion, signaling a lack of activity in the market.
Despite the overall negative sentiment, Ethereum managed to attract $13.1 million in outflows as investors remained optimistic about the impending launch of Spot Ethereum ETFs. Additionally, other altcoins such as BNB, Litecoin, XRP, Chainlink, and Cardano witnessed inflows ranging from $0.3 million to $1.1 million. This diversification of investments could signal a shift in investor preferences towards alternative cryptocurrencies.
The recent outflows in crypto funds highlight the prevailing market uncertainty and investor caution in the face of external factors such as interest rate hikes and price volatility. The dominance of Bitcoin in the outflows underscores the cryptocurrency’s central role in dictating market trends. As the crypto sector continues to navigate these challenges, it remains to be seen how investors will adapt to the evolving landscape of digital assets.