Assets in Crypto Investment Products Hit 2-year Low

Assets under management in crypto investment products have hit a two-year low as investors have increasingly moved toward offerings that short bitcoin and ether. 

Crypto products tallied inflows of $44 million last week, according to a Monday CoinShares report, yet sentiment among investors is mixed. 

“Short investment product inflows represented 75% of the total inflows, suggesting, on aggregate, sentiment was deeply negative for the asset class, likely being a direct result of the ongoing fallout from the FTX collapse,” CoinShares research head James Butterfill wrote.

The $22 billion of assets under management in crypto investment products, as of last week, is its lowest level in nearly two years, according to CoinShares.

“I suspect it will take some time for confidence to improve and this time it’ll be more about better defined use cases rather than speculative,” Butterfill told Blockworks. “So a more fundamentals based approach is likely to drive more inflows into the crypto world.”

Crypto exchange FTX filed for bankruptcy last week. Lawyers representing FTX and affiliates said in a bankruptcy motion on Monday that as many as one million creditors could be named in the suit.

The $44 million of inflows are nearly the same as the prior week’s total, which marked the highest level in 14 weeks. 

Bitcoin investment products saw inflows of $14 million last week, according to CoinShares. Separately, those shorting bitcoin had $18.4 million of inflows. Meanwhile, investment products shorting ether notched a weekly record of $14 million of inflows.

Assets under management within short bitcoin products stood at $173 million at the end of last week — close to the all-time high of $186 million. 

The trading volumes for ProShares’ Short Bitcoin Strategy ETF (BITI) spiked to a record 7.2 million shares on Nov. 8 as news about FTX’s liquidity issues developed. The fund aims to profit from the price decline of bitcoin by tracking the inverse daily price movements of an index of front-month CME bitcoin futures.

BITI, up nearly 12% from a month ago, currently has roughly $110 million in assets under management, according to ETF.com.

“Concerns regarding cryptocurrency exchanges have led many investors to consider moving their bitcoin holdings out of exchanges and into ‘cold’ storage,” ProShares Global Investment Strategist Simeon Hyman said in an email. “For those interested in bitcoin exposure who may not even know what cold storage of bitcoin is, the bitcoin futures market offers a compelling and regulated alternative that has functioned well.”

Butterfill said that short strategies typically make up between 1% and 5% of various ETP segments.  

“The high fees tend to limit appetite for them,” he added. “Currently with the short-bitcoin AUM at 1.25% of long bitcoin, it could easily double in size.”

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