Crypto Funds See Record $942 Million Outflows As Bitcoin ETF Inflows Stabilize

Cryptocurrency investment products experienced record-breaking outflows totaling $942 million in the week ending March 25, 2024, according to a CoinShares report. The massive withdrawal marks the first negative week after a seven-week inflow streak that saw more than $12.3 billion pour into digital asset funds. Despite the headline-grabbing exodus, signs of stabilization are emerging as spot Bitcoin ETF inflows turned positive again on Monday.

TL;DR

• Crypto investment products see record $942 million weekly outflows, ending a 7-week inflow streak of $12.3 billion
• Bitcoin-focused funds account for $904 million of total outflows
• Ethereum, Solana, and Cardano also see outflows of $34M, $5.6M, and $3.7M respectively
• Spot Bitcoin ETFs turn positive again on March 25 with $15.4 million net inflows
• Fidelity FBTC leads with $261 million inflows while GBTC bleeds $350 million
• Brazil extends its crypto fund inflow streak to 13 consecutive weeks

Record Outflows End Seven-Week Inflow Streak

Digital asset investment products witnessed the largest weekly outflows on record, with $942 million exiting funds globally during the week of March 18-22, 2024. The figure, reported by asset management firm CoinShares on March 25, represents a dramatic reversal from the prior seven weeks, during which crypto funds attracted a cumulative $12.3 billion in inflows.

James Butterfill, Head of Research at CoinShares, attributed the reversal to investor caution following Bitcoin’s price correction from its recent all-time highs. “We believe the recent price correction led to hesitancy from investors, leading to much lower inflows into new ETF issuers in the US, which saw $1.1 billion inflows, partially offsetting incumbent Grayscale’s significant $2 billion outflows last week,” Butterfill stated in the report.

Trading volumes in exchange-traded products reached $28 billion for the week, representing approximately 66 percent of the prior week’s volume. The decline in trading activity further reflects the shift in market sentiment as investors adopted a more cautious posture.

Bitcoin Bears The Brunt Of Selling Pressure

Bitcoin-related investment products bore the majority of the outflow burden, accounting for $904 million of the total $942 million withdrawn. The sharp sell-off in Bitcoin funds coincides with BTC trading around $69,958 on March 25, down from its mid-March peak above $73,000.

Ethereum funds also experienced notable outflows of $34 million, while Solana and Cardano products saw $5.6 million and $3.7 million in outflows respectively. Interestingly, not all altcoins suffered: investment products tied to Polygon and Avalanche actually recorded net inflows totaling $16 million, suggesting that some investors are rotating into Layer 2 and alternative blockchain ecosystems during the broader pullback.

Spot Bitcoin ETFs Flash Recovery Signs

Despite the grim weekly figures, March 25 brought a glimmer of hope as the nine spot Bitcoin ETFs collectively recorded net positive inflows of $15.4 million. The modest positive figure marks the end of a five-day outflow streak and suggests that institutional appetite for regulated Bitcoin exposure remains intact.

Fidelity’s FBTC emerged as the clear winner on Monday, recording $261 million worth of inflows. BlackRock’s IBIT, which had been the dominant inflow vehicle in previous weeks, received a comparatively modest $35 million. The shift in leadership between the two largest spot Bitcoin ETF issuers reflects evolving investor preferences as the market matures beyond the initial launch excitement.

Grayscale’s GBTC continued to bleed, with $350 million in outflows on March 25 alone. However, Bloomberg strategist James Seyffart linked much of the recent GBTC selling pressure to bankruptcy proceedings, specifically sales by Gemini and Genesis, which together held approximately 68 million shares of GBTC. Seyffart anticipates this forced selling trend will decelerate in the coming weeks.

Regional Flows Paint A Divergent Picture

The outflows were not evenly distributed geographically. European markets saw significant withdrawals, with Sweden leading at $37 million in outflows, followed by Hong Kong at $35 million, Switzerland at $25 million, and Germany at $4 million. The European exodus suggests that institutional investors in these markets are particularly sensitive to price volatility.

Conversely, some markets demonstrated remarkable resilience. Brazil extended its crypto fund inflow streak to 13 consecutive weeks, accumulating $101 million in positive flows since the start of 2024. Canada also contributed $8.4 million in inflows. The Brazilian data is especially noteworthy, as it suggests that crypto adoption in Latin America continues to accelerate regardless of short-term price action.

Morgan Stanley Could Open The Floodgates

Looking ahead, reports indicate that Morgan Stanley may begin offering spot Bitcoin ETF access to its wealth management clients within weeks. If confirmed, the move by one of the largest wealth managers in the United States could significantly expand the addressable market for spot Bitcoin ETFs and potentially reverse the outflow trend.

Year-to-date flows into crypto investment products remain overwhelmingly positive at over $12 billion, even accounting for the record outflow week. Ethereum has attracted $87 million in net flows in 2024, while Solana has seen just $1 million in net inflows despite significant investor attention throughout 2023.

Why This Matters

The record $942 million outflow week represents the first major stress test for crypto investment products since the spot Bitcoin ETF launches in January 2024. While the headline number is alarming, the context matters: the outflows represent less than 8 percent of the $12.3 billion that flowed in during the preceding seven weeks, and year-to-date flows remain firmly positive. The quick recovery in spot Bitcoin ETF inflows on March 25, led by Fidelity’s $261 million, suggests that institutional demand has not evaporated but rather paused during a period of price uncertainty. With potential catalysts like Morgan Stanley’s ETF adoption on the horizon and the Bitcoin halving approaching in April, the structural demand for regulated crypto investment vehicles appears to remain intact despite this temporary setback.

Disclaimer: This article is for informational purposes only and does not constitute financial advice. Readers should conduct their own research before making any investment decisions.