Crypto Funds Hit by $454 Million Weekly Exodus as Fed Rate Cut Hopes Fade

Bitcoin-linked products lost $405 million as investors reduced their exposure amid macro uncertainty.

Digital asset investment products recorded net outflows of $454 million last week as investor positioning rapidly shifted in early January. The market saw four consecutive days of net withdrawals, which amounted to roughly $1.3 billion, erasing the $1.5 billion that flowed into the products during the first two trading days of January.

CoinShares attributed the move largely to growing concerns that the Federal Reserve will be less likely to cut rates in March following stronger-than-expected recent macroeconomic data.

XRP and Solana defy a broader slump

In the latest edition of the Digital Asset Fund Flows Weekly Report, CoinShares revealed that Bitcoin was the hardest-hit asset, as products tied to the cryptocurrency saw $405 million disappear over the week. At the same time, short Bitcoin products also recorded outflows of $9.2 million, indicative of a lack of consensus among investors on near-term price direction.

Ethereum-based products also faced significant selling pressure, with an outflow of $116 million, while multi-asset strategies saw an exit of $21 million.

Smaller declines were seen in products related to Binance and Aave, which saw $3.7 million and $1.7 million exit, respectively.

On the other hand, several altcoin investment products continued to attract new capital. XRP led the group with $45.8 million, followed by Solana with $32.8 million and Sui with $7.6 million. Chainlink also saw renewed interest, adding $3 million last week.

From a regional perspective, the recent decline in digital asset investment products has been largely driven by the United States, while investor activity outside the US has remained positive on balance, albeit on a much smaller scale. In the US, $569 million disappeared from digital asset products.

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In contrast, Germany recorded the strongest inflows at $58.9 million, followed by Canada with $24.5 million and Switzerland with $21 million. Smaller gains were reported in Australia at $4.7 million, the Netherlands at $3.2 million, France at $1.4 million, Sweden at $0.4 million and New Zealand at $0.3 million.

“Dispel the bullish expectations”

This cautious approach has been visible in the recent price action. For example, QCP Capital said the recent Bitcoin price action reflects continued pressure and limited near-term upside. While assets initially rose along with gold and silver in early trading in Asia as the US dollar weakened, the move quickly faded.

Bitcoin failed to maintain levels above $92,000 and retreated during the European session. In doing so, the crypto ultimately repeated a pattern we saw several times in the fourth quarter of last year.

According to QCP, BTC has repeatedly struggled to maintain gains even when supported by stories that would normally be considered positive. The company too identified changes in the options markets, where traders reduced some bullish, long-dated call positions and pushed others to later expiration. This means that expectations for higher prices have been postponed.

Continued selling during US trading hours, continued supply pressures and rising macro uncertainty continue to weigh on prices as near-term volatility risks remain elevated ahead of US economic and legal developments.