Published: November 20th, 2024
If the amount of money flowing into digital asset funds is any indication, a new period of crypto mania is in full swing.
A report from European asset manager CoinShares on Tuesday said that assets under management for crypto investment vehicles had hit a new all-time high of USD 138 billion. The high-water mark was reached last week when crypto traders and institutional investors poured USD 2.2 billion into crypto funds.
CoinShares maintains a global crypto fund tracker focused on instruments that give investors indirect exposure to digital coins and tokens like Bitcoin, Ethereum, and Solana, particularly spot exchange-traded funds (ETFs).
'The sudden surge in inflows looks to be sparked by a blend of loosening monetary policy and Donald Trump’s resounding victory in the recent US presidential election,’ CoinShares’ report said.
The firm's analysts wrote that most of the money found its way into US-listed spot ETFs, giving both sophisticated and retail investors exposure to cryptocurrency price movements.
America’s chief financial watchdog, the Securities and Exchange Commission (SEC), gave the green light to 11 new spot Bitcoin ETFs in January 2024. Managed by financial giants like BlackRock, Fidelity, and Grayscale, the funds give a broad range of investors the ability to invest in cryptocurrencies in a straightforward and regulated manner.
After Trump’s White House win and the Republican sweep of both houses of Congress on 5th November, earlier this month, the price of Bitcoin has skyrocketed to above USD 93,000, driven in part by enthusiasm for crypto ETFs.
It's not the first time this year investors have rapidly rushed into crypto ETFs. In August, Bitcoin exchange-traded funds (ETFs) saw inflows of USD 1.35 billion, chalking up the fifth-best week of the year for BTC-devoted funds.
Data from CoinShares showed that close to USD 1.44 billion in assets found their way into exchange traded crypto funds generally, bringing this year’s total to an all-time high of USD 17.8 billion, well in excess of 2021’s previous figure of USD 10.5 billion.
Bitcoin pulled in the lion’s share, which is not surprising. Neither is the fact that USD 1.3 billion of the total came from American investors. The rise has been steady, with August’s inflows tripling the USD 441 million mark achieved just two weeks before. That was when crypto fund inflows turned positive again after three weeks of losses.
An analysis from Farside Investors echoed the CoinShares finding, showing that US spot Bitcoin ETFs saw a full week of daily inflows, posting more than USD 310 million in net inflows on Friday, July 12th, 2024 alone. That was the highest level seen in over a month.
CoinShares’ numbers also had Ethereum racking up positive inflows of around USD 72 million as crypto traders prepare for the expected approval of spot Ethereum ETFs. Altcoins like Solana, Avalanche benefitted from bullish sentiment, with Solana-based funds attracting close to USD 4.3 million in inflows.
In a commentary accompanying the data release, CoinShares said price weakness caused by the German government’s Bitcoin liquidation in late July, along with "changing sentiment thanks to lower than anticipated inflation readings in the US had spurred investors to extend their crypto positions.”
In May of this year, following a period of sustained outflows, better days appeared to be back for Bitcoin exchange-traded funds (ETFs). Across the board, every one of the (then) new-ish class of US investment products saw cash flow turn positive.
Figures from Farside Investors showed that Bitcoin ETFs had achieved a unanimous turnaround. Investors flowing cash into Grayscale’s Bitcoin Trust (GBTC) was the definitive move, marking the first-time that net inflows went positive since converting to an ETF in January.
From that point the fund experienced daily outflows as investors who had been unable to redeem shares previously exercised the option, apparently in a bid to locate competing funds with lower fees.
That all changed when GBTC ballooned by USD 62 million. That, and parallel moves by investors sending cash to all the other crypto funds, added up to USD 378 million flowing into the Bitcoin ETF market in a single day.
The turnaround was notable since the new investment vehicles had also posted their worst day ever the same week, losing more than half a billion dollars. The sudden departure came after weeks of cooling investor interest.
In January, the US Securities and Exchange Commission (SEC) finally gave assent to 11 spot Bitcoin ETF applications after a decade of regulatory heel-dragging. The funds allow everyday investors to gain exposure to crypto markets through a brokerage account. The instruments track the price of the cryptocurrency, so investors don't have to hold the crypto and face direct exposure to its ups and downs.
Earlier this year, January figures from CoinShares suggested a lot of money was exiting big Bitcoin funds, possibly explaining the price drop BTC and other cryptocurrencies experienced in the same time frame.
On the upside it appeared that outflows from the biggest fund, Grayscale, were starting to subside.
Investors had been in a hurry to cash out their Grayscale holdings since the fund changed over to an exchange-traded fund (ETF) in early January. This sent Bitcoin’s price plummeting when the fund moved its cryptocurrency holdings to Coinbase for custody.
The outflows from Grayscale alone came to USD 2.2 billion by mid-January, though CoinShares says outflows were starting to level off by end of January.
CoinShares added that investors also took over USD 500 million out of the hands of big crypto fund managers like Fidelity, ProShares, Bitwise, and 21Shares. Most of the outflows were in BTC.
Yet even with all the cash flowing out of these big funds, the newly minted Bitcoin ETFs did see significant inflows. ‘Newly approved BTC ETFs saw inflows in the region of USD 1.8 billion, a reverse image of the impact in BTC investment funds. Since Bitcoin ETFs were approved by the SEC in early January, there have been inflows of USD 5.93 billion,’ CoinShares said.
