Crypto Funds See $223M Outflows, Ending 15-Week Winning Streak Amid Hawkish Fed Sentiment
Cryptocurrency investment products experienced a notable shift last week as global crypto exchange-traded products (ETPs) recorded $223 million in outflows, marking the end of a 15-week streak of consecutive inflows. This change in investor behavior came in the wake of hawkish comments from the U.S. Federal Reserve following its latest Federal Open Market Committee (FOMC) meeting, which tempered market optimism.
According to a report published Monday by crypto asset management firm CoinShares, the week began strongly with $883 million in inflows. However, the trend reversed in the second half, likely due to the combination of the Fed’s firm stance on interest rates and a series of better-than-expected economic data from the United States.
CoinShares attributed the outflows in part to what appears to be minor profit-taking, noting that the sector has absorbed $12.2 billion in net inflows over the last 30 days—accounting for half of all inflows seen in 2023 so far. This robust inflow over recent weeks perhaps made some investors choose to realize gains amid uncertainty.
Federal Reserve Chair Jerome Powell’s remarks have also dampened expectations for an interest rate cut in September, with market probability estimates falling from 63% before the FOMC meeting to just 40% afterward. This sentiment shift intensified at a time when Bitcoin (BTC) is entering August, a month historically fraught with weaker performance. Data from CoinGlass reveals Bitcoin’s median return in August stands at approximately -7.5%.
Bitcoin-Led Outflows, Ether Defies Trend
Bitcoin-related investment products accounted for the majority of last week’s outflows, with $404 million withdrawn. Despite this pullback, some analysts remain optimistic about Bitcoin’s future catalysts. Matrixport, in a research note released Friday, suggested that Bitcoin could gain momentum after the U.S. Congress reconvenes following the Labor Day recess, highlighting fiscal uncertainty as a historical tailwind for hard assets like Bitcoin.
By contrast, Ether (ETH) ETPs stood out positively, closing their 15th consecutive week of net inflows with $133 million invested last week. The ongoing interest in Ether is tied to sustained robust market sentiment around the asset. Other notable gainers included XRP with $31.2 million in inflows, Solana (SOL) at $8.8 million, and Sui (SUI) attracting $5.8 million.
Market Context and Outlook
The week also saw geopolitical and macroeconomic developments influence investor behavior. On Thursday, U.S. President Donald Trump signed an executive order imposing reciprocal import tariffs ranging from 15% to 41% on goods from 68 countries, effective August 7. While such tariff actions sent a chill through global markets, the cryptocurrency space instead experienced a “recalibration” rather than a breakdown.
Stella Zlatareva, dispatch editor at digital asset investment platform Nexo, commented that the digital asset market remains robust, supported by structural inflows, institutional conviction, and expectations for clearer U.S. regulation. Despite recent volatility, the overall market capitalization remains well above $3.7 trillion, with altcoins expected to regain stability gradually.
Looking ahead, while short-term caution may persist in crypto funds due to Fed policy and economic indicators, the longer-term outlook is buoyed by ongoing legislative dynamics and evolving investor confidence in digital assets as alternative hard assets.
This report is based on data reported by CoinShares and market analysis through early August 2023.