Crypto Investment Products Saw Mid-Month Inflow Spike

ETH investment products earlier this month had highest single week of net inflows since June 2021, according to CoinShares

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key takeaways

  • Investors are getting more comfortable with the timing of Ethereum’s merge with the Beacon Chain proof-of-stake system, CoinShares research head says
  • Bitcoin products have year-to-date inflows of $241 million, while ether offerings have outflows of $316 million over the same span

While inflows into digital asset investment products totaled $30 million last week, such offerings attracted $343 million the week prior, according to CoinShares — the highest since November 2021. 

The figures came to light in a CoinShares report published Sunday. The company reported inflows of $12 million for the week ended July 15, but corrected it in its latest report to $343 million due to “late reporting of trades.”

CoinShares Head of Research James Butterfill told Blockworks that the inflows primarily came from a smaller firm in Switzerland, but did not reveal the product issuer. 

“While it was just the provider seeing most of the flows, we saw minor inflows across most other funds, rather than outflows, suggesting improving sentiment,” he said.

Overall, bitcoin and ether products each enjoyed the inflows, with bitcoin and ether products bringing in net new assets of $206 million and $120 million, respectively. 

This marked the highest single week of inflows for bitcoin investment products since May. For ether, this was the biggest weekly inflow since June 2021, and ended an 11-week run of outflows. 

Though bitcoin products have notched year-to-date inflows of $241 million, according to CoinShares, ether products — despite the recent surge of assets — have leaked $316 million so far in 2022, CoinShares data shows. 

The Ethereum Mainnet is set to merge with the Beacon Chain proof-of-stake system in the coming months, marking the end of proof-of-work for Ethereum. The Merge sets the stage for future scaling upgrades, including sharding, and is set to reduce Ethereum’s energy consumption by roughly 99.9%, the blockchain states on its website.

Butterfill said outflows into ether products for much of the year was likely due to uncertainty surrounding when this would occur.

“These recent inflows — and price action — suggest investors are getting increasingly comfortable with the proposed Merge timing,” Butterfill said.

The Merge is scheduled to occur at the end of the year, with such upgrades taking place on a few public testnets before moving to the Mainnet. 

Ether’s price was about $1,480 at 3:30pm ET, up nearly 21% in the past month and up roughly 27% from two weeks ago. Overall, the asset’s price has dropped about 70% from its all-time high last November.

Avi Felman, head of digital asset trading at GoldenTree Asset Management, said that flows into retail investment products tend to follow price jumps, rather than lead them.

Still, he added that he believes the market is paying close attention to the Ethereum Merge, and that the change to proof-of-stake will drive the asset’s outperformance.

“However this is relative to the crypto market,” Felman told Blockworks. “There is no telling what the macro environment holds, and I don’t think that inflows due to The Merge will be able to keep Ethereum up against the dollar if equities trade poorly.”

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