Trading Volumes for Crypto Investment Products Hit 2-year Low

key takeaways

Outflows from bitcoin products are due in part to hawkish rhetoric from the Fed, CoinShares research head says
Inflows into ether offerings cool as investors may wait for the Merge before adding to positions

Trading volumes in crypto investment products last week hit their lowest levels since October 2020 as outflows in August continued, according to CoinShares data.

These offerings hit trading volumes of $901 million last week, substantially lower than the year-to-date weekly average, which stood at $2.4 billion as of Aug. 8.

Digital asset investment products also saw net outflows of $27 million last week, which was slightly higher than the $9 million in outflows from the week prior, the data shows.

“While history indicates this is in part due to seasonal effects, we believe it also highlights continued apathy following recent price declines,” CoinShares Head of Research James Butterfill said in the crypto investment firm’s Monday report.

Bitcoin and ether were trading at roughly $20,170 and $1,510 at 11:00 am ET on Monday — each down about 7% in the past seven days.

Last week’s negative net flows were driven by $29 million in outflows from bitcoin products. Investment products focused on shorting bitcoin saw small inflows of about $1 million.

“Both imply minimal but continued caution from investors which we believe is due to the ongoing hawkish rhetoric from the US Federal Reserve,” Butterfill added.

Fed Chair Jerome Powell warned during remarks on Friday at the Jackson Hole Economic Symposium that sustained price stability is still a long way off. Following Powell’s comments, some analysts said they predict another rate hike of 75 basis points in September.

“The moment there are signs of a pivot from the Fed, we are likely to see much greater institutional investor participation,” Butterfill told Blockworks in an email.

Last week’s outflows marked the third consecutive week of negative flows for crypto investment products, amounting to $46 million over that span. That trend comes after net inflows into crypto investment products totaled $474 million in July — the largest monthly total in 2022.

The influx of money into such offerings last month was partly driven by a reversal in ether products, which tallied flows of $138 million in July, compared to combined negative net flows of about $450 million in the prior six months.

Ether-focused products saw minor outflows of about $1 million last week. The number implies that, despite improving confidence due to Ethereum’s upcoming Merge next month, investors prefer to wait for the blockchain’s move from proof-of-work to proof-of-stake before adding to positions, Butterfill said.

“[The Merge] is likely to bring with it renewed confidence in Ethereum, as it ticks many of the boxes for investors looking to invest, particularly from an ESG perspective,” he told Blockworks. “If we are to see inflows and potential price appreciation towards the end of the year, it could well be led by Ethereum.”

Updated on Aug. 29, 2022 at 5:25 pm ET.

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