Crypto Outflows Surge to $876 Million

Last week, cryptocurrency outflows reached a staggering $876 million, marking a continuous trend of negative flows for the fourth consecutive week.

This ongoing sell-off has culminated in total outflows of $4.75 billion over the past month, sharply lowering year-to-date inflows to $2.6 billion. Consequently, the total assets under management (AuM) have decreased by $39 billion from their peak, now resting at $142 billion, which is the lowest figure seen since mid-November 2024.

Understanding the $876 Million Outflow

A recent report from CoinShares highlights that the majority of these outflows can be attributed to U.S. investors, who withdrew $922 million from digital asset investment products. This negative sentiment in the U.S. contrasts with other markets where investors view the recent downturn as an opportunity to buy.

Notably, Bitcoin has been at the forefront of this sell-off, as the report reveals that $756 million was withdrawn from BTC investment products over the past week. Additionally, short-Bitcoin products experienced $19.8 million in outflows, marking the largest such movement since December 2024, indicating that some investors may be nearing capitulation.

The outflows reflect a significant downward trend following previous weeks' withdrawals. In early March, digital asset investment products registered a record outflow of $2.9 billion, driven by weak investor sentiment and heightened market anxiety.

Impact of Federal Reserve Policies

This downward pressure coincides with the U.S. Federal Reserve's approach to monetary policy. As inflation continues to surpass forecasts, the Fed has indicated that interest rates may remain elevated for an extended period. This environment reduces liquidity in financial markets, adversely impacting riskier assets, including cryptocurrencies.

“We do not need to be in a hurry, and are well positioned to wait for greater clarity,” stated Fed chair Jerome Powell last week.

The exacerbated outflows and ongoing macroeconomic challenges have put the crypto market under significant strain. While certain assets, such as Solana (SOL) and XRP, have seen inflows, the overall market sentiment, particularly among U.S. investors, remains bearish.

ETF Trends and Investor Sentiment

Negative sentiment spreads beyond Bitcoin, impacting cryptocurrency-related equity exchange-traded funds (ETFs). The CoinShares report documents $48 million in outflows from these products during the same time frame, indicating a broader trend of risk aversion among investors within the digital asset space.

Despite expectations surrounding the recent White House Crypto Summit, investor caution prevails, as both Bitcoin and Ethereum ETFs logged consecutive weeks of net outflows. These trends suggest that macroeconomic factors and strategic positioning outweigh any potential positive impacts from significant events.

“…hedge funds don’t care about Bitcoin. They were farming low-risk yield. Now that the trade is dead, they’re pulling liquidity—leaving the market in free fall…This is a classic case of liquidity games. ETFs didn’t just bring in long-term holders—they brought in hedge funds running short-term arbitrage,” explained crypto analyst Kyle Chassé.