Bitcoin, Ethereum Demand Pushes 2023 Crypto Fund Investment Over $1 Billion

Fresh off Bitcoin’s climb past $37,000, CoinShares Head of Research James Butterfill told Decrypt on Friday that investors have poured over $1.07 billion into digital asset investment products so far this year.

The recent activity represents a notable jump from the $847 million in annual inflows that CoinShares relayed Monday. The report covers allocations to products like Grayscale’s Bitcoin Trust (CBTC) and Bitwise’s 10 Crypto Index Fund (BITW).

“This year is the third largest year on record in terms of just pure inflows,” Butterfill said, noting that CoinShare’s data goes back to 2015. “It's just a lot of demand, a lot of interest, and I've not experienced this level of interest since 2021.”

The industry weathered a steep drop in digital asset prices last year amid the blowup of several high-profile firms. At the time, Bitcoin fell as low as $15,649 and inflows were relatively subdued at just $389 million, Butterfill said. However, he believes the recent deluge of inflows is representative of a change in sentiment among investors, especially institutions.

“When you see very large chunks, then you know institutions really are buying,” he said, acknowledging that the source of inflows into investment products like ETFs is typically hard to tell because allocations are anonymous by nature.

Anticipation for a spot Bitcoin ETF on Wall Street has been the main driver of Bitcoin’s recent rally, analysts say. So far, products associated with crypto’s largest coin have seen $1.03 billion in inflows, representing 96% of allocations this year, according to CoinShares.

There’s less of a stigma associated with moving capital into digital asset investments now than in times past, Butterfill said, when you have “some of the largest asset managers in the world” like Franklin Templeton and BlackRock wading deeper into crypto waters.

On Thursday, filings with the Securities and Exchange Commission and NASDAQ suggested that BlackRock is laying the groundwork for an Ethereum-based ETF, analysts said. Over the past week, crypto’s second-largest coin has increased 16% to around $2,100, according to CoinGecko.

At the same time, Ethereum turned deflationary again as activity associated with altcoins on the network rose. Since CoinShare’s report on Monday, annual outflows associated with Ethereum have decreased by $30 million, shrinking from $107 million to $77 million. 

“Investors will slowly realize Ethereum is the only asset which is deflationary and offers a yield,” Butterfill said. “It’s actually quite different than Bitcoin—more like a high-yield tech stock.”

Edited by Stacy Elliott and Andrew Hayward