Crypto Market Sentiment Dips: $55M Outflows Amid SEC ETF Uncertainty

In the wake of disheartening verdicts from the U.S. Securities and Exchange Commission (SEC) regarding cryptocurrency exchange-traded funds (ETFs), the crypto market has seen a dip in sentiment, according to the CoinShares’ Digital Asset Fund Flows Weekly Report.

The report revealed that digital asset investment products encountered significant outflows totaling a staggering $55 million. Experts believe this is a direct response to recent media coverage highlighting the SEC’s reluctance to greenlight a U.S. spot-based ETF, sending ripples of apprehension through the crypto community.

Bitcoin, the flagship cryptocurrency, bore the brunt of the sentiment shift. A reversal of fortunes was witnessed as $42 million flowed out, wiping out the inflows witnessed in the preceding week. Additionally, short Bitcoin strategies faced outflows for the 17th consecutive week, with a modest exception of $2,000 inflows amounting to $2.2 million.

Altcoins were not spared from the fallout. Ethereum, the second-largest cryptocurrency by market capitalization, faced outflows of $9 million. Other prominent altcoins like Polygon, Litecoin, and Polkadot witnessed outflows of $0.9 million, $0.6 million, and $0.5 million, respectively.

Crypto Market Vulnerabilities Amid Low Volumes

The sentiment contagion extended to blockchain equities, which suffered a $6 million outflow, a testament to the broad market unease. These unsettling trends come as market volumes remain below average, partly attributed to seasonal effects, which make price movements susceptible to significant trades. 

The widespread anxiety last week contributed to a disheartening 10% drop in total assets under management (AuM), culminating at $32.3 billion by the end of the week.

The outflows weren’t isolated incidents; they spanned across product providers. Geographically, the impact was most pronounced in Canada and Germany, which witnessed outflows of $36 million and $11 million, respectively. Switzerland, however, stood in defiance of the downtrend, experiencing minor inflows totaling $3.5 million.

In recent weeks, the crypto world has been eagerly awaiting the SEC’s decision on a Bitcoin spot ETF. However, a former SEC insider, John Reed Stark, poured cold water on this anticipation. Stark’s Twitter post put forth a pessimistic perspective, citing emerging evidence of market manipulation and declaring the chances of approval for a spot Bitcoin ETF as ‘slim and none.’

However, the market stands at a crossroads as the crypto community navigates the turbulence caused by regulatory uncertainties, teetering between hope and skepticism. While stakeholders anxiously await the SEC’s eventual verdict.

Related Reading | Litecoin, XRP, and XLM Defy Crypto Market Turmoil: Altcoin Revival