Crypto Investors Focus On Short Bitcoin Funds Following Brief Grayscale ETF Frenzy
For weeks, there have been steady crypto asset outflows from digital asset investment products, reflecting the prolonged sideways movement of the cryptocurrency markets. Initially, these outflows suggested a possible shift from the prevailing adverse market sentiment about two weeks ago.
However, recent data paints a different picture, indicating that the situation may not change soon.
Short Bitcoin Funds Record More Wins
Recent data from CoinShares indicate that there had been a total outflow of $59 million from various digital asset funds in the last seven days. The data also revealed that crypto funds have experienced outflows for the eighth consecutive week, totaling $294 million over the previous four weeks.
Unsurprisingly, Bitcoin investment products form the bulk of the recent outflows, with a significant loss of $69 million weekly. There was also a similar trend recorded in Ethereum investment products, with outflows totaling $4.8 million.
This pattern of outflows reveals investors’ current bias about the market. The volatile crypto market has been going through a period of adjustments and re-evaluations in recent weeks.
Analysts opined that regulatory concerns and changes in market sentiment are some of the reasons why investment in the sector is declining. It is important to note that, despite recent outflows from digital asset funds, this trend does not signify a long-term decline in the market’s potential.
Meanwhile, short Bitcoin investment products rose in popularity, with notable inflows of $15 million during the period under review. Since the leading digital asset’s resurgence in March 2023, this inflow represents its largest.
According to CoinShares Head of Research James Butterfill, this influx is astonishing given a period of “heightened regulatory uncertainty” in the crypto market.
In the meantime, Binance, the world’s leading crypto exchange, had just been sued by the US Commodity Futures Trading Commission (CFTC). Recall that the SEC previously sued the leading crypto exchange while it sent its counterpart Coinbase a Wells Notice over an alleged breach of securities laws.
According to industry experts, Grayscale’s win over the SEC triggered the recent outflows in the crypto market and the resurgence of interest in short Bitcoin funds following widespread optimism over the past seven days.
Temporary Wins
Digital asset funds experienced a slight outflow of only $11.2 million during the week ending on September 1, representing a 93% decrease from the previous week. Bitcoin also saw $3.8 million inflows during the same period.
Analysts noted that the shift in sentiment represents a significant break from the recent pattern of substantial outflows. After Grayscale’s recent legal victory over the US securities regulator, on-chain data indicate a noticeable decline in negative sentiment.
This triumph renewed the industry participants’ hope regarding the potential approval of a spot Bitcoin Exchange-Traded Fund (ETF) soon. As a result, they have been excited as they consider this development a positive turning point for the cryptocurrency market.
Meanwhile, experts have diverse views on the likelihood of the SEC approving a Bitcoin ETF this year. Nevertheless, Bloomberg Intelligence analysts James Seyffart and Eric Balchunas are bullish about the approval. According to them, there is a 75% chance that the US SEC would approve a spot Bitcoin ETF before the end of the year.
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