Fear is rising, funds are flowing out of the crypto market
After the fourth bitcoin halving, things have been hot in the crypto sector for the past three years. The industry is even broader. Many companies have joined, while many others have had to file for bankruptcy. The infamous prime example here is the bankruptcy of the crypto exchange FTX, which was anything but regular mismanagement by a company. Despite numerous escapades and setbacks, the crypto market as a whole has been in pretty good shape. This was noticeable in the Bitcoin price , which has risen from US$ 15,000 to up to US$ 30,000 since the end of last year. BTC is currently trading at around $26,500. Nevertheless, the air seems to be running out, especially in Europe.
Crypto asset fund sees renewed cash outflow
As per the weekly CoinShares Digital Asset Fund Flows as of May 22, 2023, around $32 million flowed out of the crypto market over the past week. Even though the outflow was lower than in previous weeks, it is the fifth negative week in a row. In those five weeks, around $232 million poured out of the market. Looking at individual funds, Bitcoin funds have been particularly hard hit with an outflow of $32 million. Ethereum funds, on the other hand, account for only $1 million. At $900 million, the trading volume is also around 40 percent below this year’s average.
But not only funds are affected. The view of centralized crypto exchanges is currently not positive either. “Volume for the broader market on trusted exchanges hit $20 billion weekly, the lowest since late 2020,” the report said.
Outflow of money from the crypto market especially noticeable in Europe
If you look at the geographical distribution, it quickly becomes clear that Germany in particular stands out. Because of the 32 million US dollars that flowed out of the market, 73 percent or around 24 million US dollars went to Germany. With 3.3 million US dollars, Switzerland is also one of the countries with the largest outflow of funds. The strong outflow of money in Europe could be accompanied by the recently passed MiCA regulation.
In terms of geographic regions, Germany dominated the outflows with 73% of the total volume, equivalent to $24 million. Outflows of $3.3 million were also recorded by Swiss-based institutional funds. The crypto exodus happened the same week that European crypto legislation MiCA was passed. But this decline cannot really be explained. Because even short crypto funds, i.e. those with bets on falling prices, had to deal with outflows of money. “It is unclear why there is such coordinated negative sentiment for both long and short investment products,” the statement said.
Should you get into Bitcoin & Co. now?
Many investors run the risk of investing in cryptocurrencies exactly when prices reach new highs. To avoid this, the entry point is particularly important. In the past, it would have been particularly worthwhile to get involved in weak market phases. If you look at the upcoming Bitcoin halving in spring 2024, it could actually be one of the best ways to enter the crypto market at the moment. Because the prices and the volume are relatively low if we look at the all-time highs reached so far. So the course looks inviting.
Flattening inflation could have an equally positive effect on the capital and crypto market. Because the central banks are unlikely to raise interest rates for too long. Investors are therefore likely to seek alternative investments again in the foreseeable future. Especially since the real estate sector is currently facing a major hurdle.
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