The recent market correction in December has had a significant impact on digital asset investment products, with total assets under management for exchange-traded products (ETPs) plummeting by $17.7 billion.
Analysis from CoinShares Reveals Outflows of Over $1 Billion
According to a Dec. 23 analysis from CoinShares, digital asset funds saw over $1 billion in outflows between Dec. 19 and 20, likely in response to a slower pace of monetary easing in the coming year. The analysis noted that while ‘outflows may sound alarming, they comprise just 0.37%’ of crypto funds’ total value.
Federal Reserve’s Impact on Digital Asset Funds
On Dec. 18, the Federal Open Market Committee (FOMC) of the United States Federal Reserve reduced the federal funds rate by 25 basis points, bringing it to a target range of 4.25%–4.50%. This move was expected to have a significant impact on digital asset funds, as many investors had been anticipating further rate cuts in 2025.
However, updated projections indicated a more cautious approach to future rate cuts, with expectations of only two additional 25-basis-point reductions in 2025, down from the previously anticipated four. This shift in monetary policy has likely contributed to the outflows seen in digital asset funds.
Despite Uncertainty, Digital Asset Funds See Positive Net Flows
Despite economic uncertainty and price corrections, digital asset funds closed the week with positive net flows totaling $308 million. The CoinShares analysis noted that while the outflows were significant, they comprised a relatively small percentage of crypto funds’ total value.
ETPs Flow Breakdown: Where Did the Outflows Come From?
The majority of outflows were concentrated in foreign markets and multiasset products over the past week. Germany, Sweden, and Switzerland’s combined outflows reached $212 million between Dec. 16 and 20, while Canada’s markets saw $60 million in outflows.
On the positive side, the US amassed inflows of $567 million, followed by $16 million from Brazil and $10 million from Australia.
Bitcoin Dominates Inflows with $375 Million
Bitcoin led inflows over the week, dragging $375 million in capital, followed by Ether funds with $51 million. Multiasset products had a negative flow of $121.4 million, while Solana funds saw $8.7 million outflows.
Bitcoin’s Price Correction: A 10.5% Drop
Bitcoin’s price is down from around $106,000 on Dec. 16 to $93,370 on Dec. 20, marking a 10.5% drop over the period. Year-to-date, the cryptocurrency still posts 115% gains at the time of this writing.
Conclusion: Market Correction and Its Impact on Digital Asset Funds
The recent market correction in December has had a significant impact on digital asset investment products, with total assets under management for ETPs plummeting by $17.7 billion. While outflows were significant, they comprised a relatively small percentage of crypto funds’ total value.
Despite economic uncertainty and price corrections, digital asset funds closed the week with positive net flows totaling $308 million. Bitcoin led inflows over the week, dragging $375 million in capital. However, the market correction has highlighted the importance of careful risk management and diversification in digital asset investment portfolios.
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