Crypto Investment Products See Sharp Outflows Amid Hawkish Fed Signals

crypto investment products had a significant reversal last week with $415 million in net outflows that put an end to a five-week inflow streak that saw investors pour $6.74 billion into the cryptocurrency space.

The sudden shift is attributed to recent signals from the Federal Reserve, particularly Chairman Jerome Powell’s testimony before Congress, which indicated a more hawkish monetary policy stance. Coupled with unexpectedly high U.S. inflation figures, investors appear to have retreated, according to CoinShares’ latest Digital Asset Fund Flows report.

“We believe these outflows were triggered by the Congressional meeting with Fed Chair Jerome Powell, who signalled a more hawkish monetary policy stance, coupled with US inflation data exceeding expectations.,” James Butterfill, CoinShares Head of Research, noted in the report.

The crypto investment outflows stand in stark contrast to the robust inflows seen since the U.S. election, which totaled $29.4 billion over 19 weeks, significantly surpassing the $16 billion seen in the same period following the launch of U.S. spot Bitcoin exchange-traded funds in January of last year.

The exodus was primarily driven by U.S.-based funds, which saw $464 million in outflows. Conversely, some regions bucked the trend, with Germany seeing $21 million in inflows, and Switzerland and Canada adding $12.5 million and $10.2 million, respectively.

Bitcoin Crypto Investment Products See Massive Outflows

Bitcoin-focused crypto investment funds were particularly hard hit, with $430 million in outflows, reflecting the cryptocurrency’s sensitivity to interest rate expectations. While Bitcoin’s price has also dipped slightly, there was no corresponding surge in short-bitcoin products, which themselves saw outflows.

Despite the overall downturn, Solana investment products saw $8.9 million in inflows, the largest of any cryptocurrency fund, followed by XRP and Sui. Ethereum-based funds, which had seen substantial inflows the previous week, swung to outflows of $7 million.