Cryptocurrency Fund Inflows Drop to Lowest Level Since 2018 Despite Market Struggles

2022: A Year of Contradictory Trends in Crypto Investment

Despite a massive plummet in cryptocurrency prices, digital asset funds managed to attract $433 million in inflows throughout 2022. This figure marks the lowest level since 2018, when the industry was celebrating inflows of $233 million. So, what gives? Were investors just feeling brave, or was it simply a case of ‘FOMO’ followed by a hefty dose of despair?

The Rollercoaster of Bitcoin and Multi-Asset Products

In a year that saw bitcoin’s value dive by a staggering 63% due to a cocktail of speculative frenzy and a less-than-happy Federal Reserve, not all investors turned their backs. Notably, Bitcoin (BTC) and multi-asset investment products led the charge with inflows of $287 million and $209 million, respectively. While it’s somewhat comforting for Bitcoin bulls, it’s a far cry from the roaring bull markets of 2020 and 2021, which boasted an impressive $9.1 billion and $6.6 billion in inflows.

The Emergence of Short Investment Products

2022 also saw a flicker of innovation with the rise of short-investment products. These niche offerings raked in $108 million, representing a mere 1.1% of the total Bitcoin under management. Researcher James Butterfill aptly remarked, “They remain a niche asset,” suggesting that while people are interested, they’re still skeptical about jumping on the short-selling bandwagon.

Challenges and Outflows: A Closer Look

Interestingly, Canada and Sweden found themselves swimming against the tide, experiencing some serious outflows—amounting to $436 million and $446 million, respectively. Notably, Ether (ETH) suffered the largest outflow of $402 million as concerns over its shift to a proof-of-stake model and timing uncertainties took center stage. Butterfill pointed out that Ethereum’s trials and tribulations were likely to affect its recovery.

Historical Perspectives: Comparing Past Trends

When we take a closer look at the data, it’s evident that midyear outflows in 2018 dramatically outpaced those of 2022. Back in the summer of 2018, total weekly outflows hit a staggering 1.8% of assets under management, while 2022 peaked at a comparatively mild 0.7%. It leaves us with a burning question: what does this mean for the future of crypto investments and where exactly are investors putting their chips?