Bitcoin funds gain first inflows in two months

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Bitcoin volatility

Investor sentiment toward digital asset investment products is seeing a turnaround, with bitcoin funds receiving their first weekly inflows in two months. 

The latest data from digital asset manager Coinshares shows that investment funds based on the world’s largest cryptocurrency, bitcoin, gained inflows of USD59 million in the week to 3 September.

“This is the first inflows following an eight-week spell of outflows, the longest endured by any digital asset investment product,” notes Coinshares analyst James Butterfill.

The price of bitcoin has jumped by 65 per cent since July 20, breaking USD50,000 in early September. Nevertheless, the cryptocurrency remains a way off its all-time high of over USD63,000 in April.

Investors withdrew money from digital assets as scrutiny of the crypto assets market increased in recent months, with regulators in China, the UK, and The Basel Committee on Banking Supervision targeting the space.

Coinshares’ weekly research finds that investment in crypto funds has risen across the board, with weekly inflows quadrupling to USD98 million over the last week. 

Digital asset investment products have accumulated USD140 million over the last three weeks, “suggesting improving investor sentiment” according to Coinshares.

“Inflows were seen across all digital assets although altcoins, on an assets under management (AuM) weighted basis, remain the favourite amongst investors. Altcoin market share is now a record 35 per cent of investment products,” writes Butterfill. 

Of these, solana remains the favourite with weekly inflows totalling USD13.2 million last week, doubling its total inflows year-to-date. Meanwhile, ethereum funds received inflows of USD14.4 million, bringing its overall market share to a record 28 per cent. 

According to Butterfill, this highlights that “while some investors have protocol concerns, [ethereum’s] dominance it continuing to rise”. 

Meanwhile, the impact of future regulation on digital assets continues to be debated.

Earlier this week, the FCA chair Charles Randell spoke of the need to further regulate crypto tokens in a speech to Cambridge International Symposium on Economic Crime. Randell also gave support to proposals by Basel Committee to introduce a full capital charge for banks holding digital tokens.

Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown, comments on the regulator’s stance: “If banks and other regulated financial institutions dabble in crypto, the committee is considering making them put aside enough capital to cover 100 per cent of potential losses.”

Streeter continues: “Giving speculative tokens a high risk price tag is likely to make crypto currency dealing and investment very expensive and could limit the number of new institutional entrants into the crypto world.”

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Madeleine Taylor
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