The crypto market has been experiencing a prolonged period of bearish sentiment, as investors continue to take profits or cut losses amid regulatory uncertainty and environmental concerns. According to the latest data from CoinShares, crypto funds saw net outflows of $493 million in the week ending September 17, marking the third consecutive week of negative flows.
One of the indicators of the market mood is the flow of funds in and out of crypto investment products, such as exchange-traded funds (ETFs), exchange-traded notes (ETNs), and other vehicles that track the performance of crypto assets. According to the latest report from CoinShares, a digital asset investment firm, crypto funds have seen a net outflow of $496 million in the past four weeks, marking the longest streak of outflows since February 2018.
The report shows that bitcoin funds have suffered the most, with a net outflow of $344 million in the past week and $1.3 billion in the past month. Ethereum funds have also seen a net outflow of $64 million in the past week and $278 million in the past month. Other altcoins, such as XRP, Cardano, Polkadot, and Solana, have also experienced net outflows, albeit at a smaller scale.
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The report suggests that the main drivers of the outflows are the regulatory uncertainty, the environmental concerns, and the competition from other asset classes, such as equities and commodities. The report also notes that some investors may be taking profits after the strong rally in the first quarter of 2021 or reallocating their portfolios to reduce their exposure to crypto volatility.
The outflows were mainly driven by bitcoin and Ethereum, which accounted for $327 million and $151 million respectively. Bitcoin funds have now recorded outflows for six of the past seven weeks, while Ethereum funds have seen outflows for five of the past six weeks. The total assets under management (AUM) of crypto funds have declined by 14% since mid-May, when they reached a record high of $66 billion.
However, not all crypto assets are suffering from the same fate. Some altcoins, such as Solana (SOL), Cardano (ADA) and ripple (XRP), have managed to buck the trend and attract positive inflows in the past week. These coins have been outperforming the market, thanks to their strong fundamentals, innovative features and loyal communities.
Solana, which claims to be the fastest and most scalable blockchain platform, saw inflows of $13.2 million, bringing its total AUM to $42 million. The coin has surged by more than 300% in the past month, reaching a new all-time high of $214 on September 9. Solana’s growth has been fueled by the launch of several decentralized applications (dApps) and non-fungible tokens (NFTs) on its network, as well as the anticipation of its upcoming Ignition event, which will showcase its ecosystem and potential.
Cardano, which recently completed its long-awaited Alonzo upgrade, saw inflows of $6.4 million, bringing its total AUM to $69 million. The coin has gained more than 100% in the past month, hitting a new record high of $3.10 on September 2. Cardano’s Alonzo upgrade enables smart contract functionality on its network, opening the door for more dApps and NFTs to be built on its platform. Cardano’s founder, Charles Hoskinson, has also announced several partnerships and projects that will leverage its technology, such as with Dish Network and Chainlink.
Ripple, which is still embroiled in a legal battle with the US Securities and Exchange Commission (SEC), saw inflows of $3.1 million, bringing its total AUM to $66 million. The coin has risen by more than 60% in the past month, reaching a three-month high of $1.35 on September 6. Ripple’s rally has been driven by its ongoing expansion in global markets, especially in Asia and the Middle East, where it has signed deals with various banks and payment providers to use its XRP-based solutions.
Ripple’s CEO, Brad Garlinghouse, has also expressed confidence that the company will prevail in its lawsuit with the SEC, which could pave the way for more institutional adoption of XRP.
However, the report also points out some positive signs for the crypto market, such as the growing adoption of crypto by institutional investors, corporations, and governments. The report cites examples such as MicroStrategy’s purchase of additional 13,005 bitcoins in June, El Salvador’s adoption of bitcoin as legal tender, and Paraguay’s introduction of a bill to regulate crypto assets. The report also highlights the resilience of the crypto market, which has recovered from several sharp drops and maintained a market capitalization above $1.5 trillion.
The divergence in performance and flows among different crypto assets reflects the increasing maturity and diversity of the crypto space, as well as the varying preferences and risk appetites of investors. While some may prefer to stick with the established and dominant players like bitcoin and Ethereum, others may seek to explore the emerging and innovative alternatives like Solana, Cardano and ripple. As the crypto market evolves and expands, investors will have more options and opportunities to diversify their portfolios and capture value from this dynamic sector.
The report concludes that while the short-term outlook for crypto remains challenging, the long-term fundamentals are still intact and supportive of further growth and innovation. The report states that “we believe we are still very early in this cycle and that there is still significant room for growth across all digital assets.”