Consecutive Outflows for Cryptocurrencies
Since mid-December, the cryptocurrency sector has witnessed four consecutive weeks of record outflows. As a result, this sector reached a total outflow of around $465 million, with an asset under management of 0.8%.
Bitcoin, which is the largest cryptocurrency in the world regarding market cap, posted an outflow of $107 million until 7 January 2022.
CoinShares notes that there has been increased investor activity in the cryptocurrency space over the past four weeks.
Since the start of 2022, bitcoin has lost around 10% of its value against the U.S. currency. Moreover, it fell below $40,000 on Monday, i.e., 10 January 2022. This happened for the first time since September 2021.
Blockchain data provider Glassnode, in its latest report, said that the flush-out in bitcoin is attributed to a stage of heavy loss cognizance by top buyers. It further added that long-term holders (HOLDer) heavily dominate bitcoin’s behaviour as of now. There is very little investment activity by newer market participants.
Meanwhile, products of Ethereum featured an outflow of $39 million during last week. The cryptocurrency experienced a five consecutive week outflow amounting to a whopping $200 million.
The negative sentiment in this sector did not spare blockchain-linked equity investment. These products witnessed an outflow of $10 million during the previous week.
Reason Behind the Outflows
As per investment strategists, these outflows directly react to the Federal Open Market Committee (FOMC) minutes. This revealed the Federal Reserve’s concern regarding rising inflation. It also added that investors fear a hike in interest rates amid these storms.
A tightened policy by the U.S. Federal Reserve will negatively affect risk factors, including cryptocurrencies. This is because it will lead to increased volatility in the market and result in tighter surroundings in terms of liquidity.
The future of cryptos will rationally rely on three major factors – regulation, energy efficiency, and adoption. Further regulations by the Federal Reserve will prove extremely important in determining the future prospects of this sector.
Sources – Business Standard
Frequently Asked Questions
How much were Ethereum outflows in terms of AUM?
Outflows of Etherium stood at $200 million for the past five weeks, which was 1.4% of its overall AUM. This was higher than bitcoin.
Where do assets under the management of Grayscale and CoinShares stand?
Assets under the management of the two largest digital managers in the world, CoinShares, and Grayscale, stand at $4.3 billion and $38.2 billion, respectively.
What was bitcoin’s valuation as of November 2021?
As of 8 November 2021, bitcoin reached its peak valuation of $67,582, when it had capped its value at around $4,000.
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Angel One Limited does not endorse investment and trade in cryptocurrencies. This article is only for education and information purposes. Discuss with your investment advisor before making such risky calls.