Crypto Investors Exit Digital Assets Amid Rate Hike Anxiety and Global Instability

Amidst interest rate concerns and geopolitical uncertainty, crypto investors withdrew $206 million from digital asset products last week, marking the second consecutive week of outflows. Bitcoin (BTC) bore the brunt of these withdrawals, particularly in U.S. ETFs and other financial vehicles underpinned by BTC, amounting to over $192 million.

Cryptocurrency Investors Flee Digital Asset Products Amidst Rate Hike Fears and Global Uncertainty

Cryptocurrency investors continue to withdraw colossal sums from digital asset investments, with the latest outflow tallying over $200 million, marking the second consecutive week of significant redemptions. CoinShares, a leading digital asset manager, reports that these withdrawals primarily stem from US-based exchange-traded funds (ETFs) and financial instruments backed by Bitcoin (BTC).

The escalating interest rate by central banks, particularly the Federal Reserve's (FED) recent hawkish stance, has fueled concerns among investors, leading them to retreat from riskier assets like cryptocurrencies. Analysts believe that maintaining high-interest rates for an extended period may further dampen investor sentiment in the digital asset market.

Total global ETP trading volumes have also taken a hit, dropping from $21 billion last week to $18 billion this week. Notably, Bitcoin trading activity continues to trend upward, but its share in ETF trading has significantly decreased from 55% a month ago to approximately 28% currently. This decline underscores the macroeconomic headwinds impacting the crypto market.

"The data suggests that the appetite from ETP/ETF investors continues to dwindle, likely due to expectations that the FED is likely to keep interest rates at these high levels for longer than expected," CoinShares analysts stated in their weekly report.

While US ETFs suffered losses amounting to $244 million, Bitcoin faced outflows of over $192 million, attributed in part to liquidations in Grayscale's GBTC trust. However, bearish investors have not made substantial moves to short Bitcoin, with short-Bitcoin investments seeing outflows of only around $300,000.

Ether (ETH), the second-largest cryptocurrency, extended its outflow streak to six weeks, with another $34 million withdrawn from Ether-based investment products. ETH has remained relatively stable over the past week, with a meager 0.30% price change, according to CoinMarketCap.

Blockchain equities also faced outflows totaling $9 million, marking the 11th consecutive week of declining investor confidence in the crypto sector. CoinShares analysts highlight concerns among investors about the potential impact of the upcoming Bitcoin halving, which will reduce the rewards for mining Bitcoin, on mining companies.

"We believe that the outflows from crypto funds are likely to continue in the near term as investors remain cautious about the impact of rising interest rates and the potential for further macroeconomic headwinds," CoinShares analysts concluded.

As the global economy continues to grapple with geopolitical turmoil and the threat of persistent inflation, the crypto market is likely to face further volatility. Investors are advised to exercise caution and consider their risk tolerance before making any investment decisions.