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Crypto Funds Hit by Redemptions as Investors Retreat From Bitcoin
Investors have been diversifying out of bitcoin and into altcoin investment products, according to CoinShares.
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Investors pulled some $50 million from cryptocurrency funds last week, the first net redemptions of the year, as bitcoin's (BTC) price tumbled.
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According to a report Monday by CoinShares, outflows from bitcoin-focused funds totaled a record $98 million in the seven days through May 14, while investment products focused on other digital assets continued to pull in new money.
The net amount still represents a small fraction of the $5.6 billion put into cryptocurrency funds this year, but the outflows show how quickly some investors were to retreat as bitcoin began a price pullback that has now extended to as much as 35% from April's all-time high.
"Investors have been diversifying out of bitcoin and into altcoin investment products," according to CoinShares.
- Investor demand for investment products focused on ether (ETH) continued to rise, totaling $27 million last week.
- May marks the first month there has been more investment product trading volumes in ether relative to bitcoin.
- Digital asset investment products focused on ether traded a total of $4.1 billion for the week, versus bitcoin's $3.1 billion.
- “We also saw inflows into other digital assets, the most popular being cardano (ADA) and polkadot (DOT), with inflows of $6 million and $3.3 million, respectively.”
Read more: Bitcoin Suffers Biggest Pullback This Year, Drops to 3.5-Month Low Near $42K
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Rampant speculation on crypto derivatives platforms is fueling volatility and risking bitcoin’s image as a stable hedge, says BlackRock’s digital assets chief.
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- BlackRock digital-assets chief Robert Mitchnick warned that heavy use of leverage in bitcoin derivatives is undermining the cryptocurrency’s appeal as a stable institutional portfolio hedge.
- Mitchnick said bitcoin’s fundamentals as a scarce, decentralized monetary asset remain strong, but its trading increasingly resembles a "levered NASDAQ," raising the bar for conservative investors to adopt it.
- He argued that exchange-traded funds like BlackRock’s iShares Bitcoin ETF are not the main source of volatility, pointing instead to perpetual futures platforms.
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