What kind of FUD? CoinShares reports its largest inflows in months

What kind of FUD? CoinShares reports its largest inflows in months

Digital asset investment products saw their biggest inflows in 14 weeks amid chaos in the crypto market, fueled in part by the fall of crypto exchange FTX and sister organization Alameda Research.

Last week's $42 million inflows into crypto offerings began later in the week as extreme price weakness triggered by the declines of FTX and Alameda, according to James Butterfill, head of research at CoinShares.

The increase came after weeks of relatively flat flows, which Butterfill said previously signaled investor “apathy.”

Bitcoin's price was around $16,600 as of 11 a.m. ET on Monday - down about 20% from seven days ago.

“It suggests that investors are seeing this price weakness as an opportunity and are distinguishing between ‘trusted’ third parties and an inherently trustworthy system,” Butterfill said a blog post Monday.

Bitcoin investment products recorded $19 million in inflows last week, the largest since early August. Short Bitcoin offerings also saw nearly $13 million in inflows, highlighting that some investors are “scared,” Butterfill added.

ProShares' Bitcoin ETFs saw record trading volume on November 8 as crypto volatility increased, both before and after Binance announced its intention to buy rival exchange FTX as it faced a "liquidity crisis."

About 49 million shares of ProShares Bitcoin Strategy ETF (BITO) were traded on the day, while shares traded in ProShares Short Bitcoin Strategy ETF (BITI) totaled 7.2 million.

Binance tweeted on November 9 that it had decided not to proceed with its purchase of FTX, citing “news reports of mishandled customer funds and alleged investigations by US authorities.” FTX said on November 11 that FTX founder Sam Bankman-Fried had resigned as the company's CEO and that the exchange - and around 130 companies affiliated with FTX - had entered into voluntary bankruptcy proceedings.

Reuters reported On Sunday, during a meeting on November 7, Bankman-Fried pulled up spreadsheets showing that FTX had transferred around $10 billion in customer funds to Alameda Research over time. Between $1 billion and $2 billion of those funds were not included in Alameda's remaining assets, according to the report.

“The recent crypto exchange turmoil has reinforced the potential benefits of Bitcoin-related exposure via the regulated, transparent futures market,” Simeon Hyman, Global Investment Strategist at ProShares, told Blockworks in an email. “The record volume at BITI… and at BITO illustrates the strong demand from investors looking to express bearish and bullish views on Bitcoin.”

Blockchain equity investment products recorded $32 million in outflows, the largest total since May. Meanwhile, multi-asset products had inflows of more than $8 million - the highest since June - which Butterfill said suggests investors view this segment as "a relatively safe haven."

Grayscale Investments' Bitcoin Trust (GBTC) traded at a deeper discount than ever last week, reaching nearly 42% as of November 10, according to data YCharts Data. Analysts told Blockworks that the slim chance of a U.S. Bitcoin ETF being approved soon has likely diminished due to last week's events.

Grayscale is currently in a legal battle with the SEC to overturn the regulator's rejection of its application to convert GBTC into an ETF.

“Now more than ever, American investors deserve safer, regulated ways to access Bitcoin and the crypto ecosystem – and [GBTC] as an ETF would provide exactly that level of protection,” Grayscale Chief Legal Officer Craig Salm said in an email to Blockworks. “As such, recent events – while unfortunate for the entire crypto ecosystem – should strengthen our case before the DC Circuit Court of Appeals.”

. .

The article What FUD? CoinShares reporting largest inflows in months is not financial advice.