Outflows Continue Amidst Negative Market Sentiment
During the week ending August 25, digital asset investment products experienced outflows worth over $168 million, marking the largest outflow since the U.S. Securities and Exchange Commission (SEC) filed lawsuits against major exchanges in March. The total outflows for August now stand at $278 million, indicating a remarkably low trading volume market with a 16% decrease from the yearly average trading volume of $1.3 billion. CoinShares’ Head of Research, James Butterfill, attributed this negative sentiment to the growing acceptance that a spot-based Bitcoin ETF in the U.S. is likely to face further delays announced by the SEC.
Bitcoin Products Primary Contributor to Outflows
Out of the total outflows, Bitcoin (BTC) products accounted for the majority with $149 million withdrawn from these funds last week. The net basis flows for the year, however, remained positive at $265 million. Butterfill highlighted that short positions were being sold, resulting in $4 million outflows last week and a consistent 18-week run of outflows making up 89% of the total assets under management (AuM).
Other Digital Assets and Regional Trends
Ethereum experienced outflows totaling $17 million, while XRP and Litecoin (LTC) saw minor inflows of $0.5 million and $0.44 million respectively. The outflows were broad-based and spread across multiple geographies, including Germany and Canada with outflows of $68 million and $61 million respectively. Brazil stood out with the highest level of inflows, amounting to $2.2 million.
Market Expectations and Recent Developments
Analysts anticipate a potential turnaround in the coming weeks following the U.S. Court of Appeals’ ruling that the SEC must review Grayscale’s application to convert its Grayscale Bitcoin Trust (GBTC) into a spot Bitcoin exchange-traded fund (ETF). ETF analysts Eric Balchunas and James Seyffart from Bloomberg Intelligence noted that the premium on GBTC, which hit a low of -48.89% in December, is now at its highest level since April 2022.
