Ethereum Is Losing Favor Among Institutional Investors: CoinShares

By Pedro Solimano

Institutions have fallen out of love with Ethereum in 2023, selling upwards of nine digits of the asset in the year to date.

According to the latest analysis by CoinShares, the number two cryptocurrency saw $4.8 million in outflows this past week, reaching $108 million in sales this year. That places it as the most sold digital asset by large entities, wrote James Butterfill, head of research for CoinShares.

The analyst labeled it the “least loved digital asset” for exchange-traded product (ETP) investors, trouncing its second-place holder, Tron, by more than $50 million. 

However, all that could change soon after Cathie Wood’s Ark Invest applied for the first spot Ethereum ETF last week—the first of its kind in the United States. And that news comes after the network turned inflationary and on-chain activity plummeted as the grueling bear market carries on. 

What Ethereum has felt this year is broadly based among digital assets, per CoinShares.

Sentiment regarding institutions purchasing crypto remains poor, according to their weekly report published this morning. It showed a fourth consecutive week of selling, with outflows totaling $59 million over the past seven days.

The current run of outflows, wrote James Butterfill, reaches $294 million, representing 0.9% of total assets under management (AUM). 

Selling came primarily from North America, with Canada and the United States offloading $17.6 million and $12.3 million in the past seven days. Germany led the way across the Atlantic and into Europe, with $20 million worth of selling. 

Butterfill told Decrypt that the main reason behind the rampant selling is the U.S. dollar. It has shown strength as of late, driven by the “market’s belief we are in a soft landing scenario,” posting eight straight weeks of green candles. 

Even so, he reckons that as the year ends, it will “increasingly be seen that this isn’t the case,” especially if high-interest rates kick in. 

Although the previous report by CoinShares highlighted a bunch of under-the-surface trading, with volumes skyrocketing by 90% to $2.8 billion, this week's trading activity plummeted. 

Volumes “are super low,” revealed Butterfill, averaging “just” $2.3 billion daily over the past month, compared to the yearly average of $7 billion. The last seven days were an even further cry from these numbers, dropping by 73% to $743 million.

This suggests, the analyst told Decrypt, an “apathetic investor”—clarifying, however, that the market saw a very similar scenario prior to the last two Bitcoin halvings.

Bitcoin was the most damaged crypto asset last week, with large entities offloading a whopping $69 million worth of the asset despite being in the green the week prior. 

Adding to the bearishness, Bitcoin short products saw the largest weekly inflows since March, with $15 million pouring into these instruments. “Timing wise this is interesting as the inflows in March also came at a time of heightened regulatory uncertainty,” said Butterfill. 

What’s to come? Butterfill suspects that many investors are waiting to see what the Fed will do this month with interest rates, with any potential weakness in the dollar “likely to be supportive for Bitcoin.”

The analyst concluded, however, that CPI could come in above expectations due to the swift surge in gasoline prices. He also pointed to FTX, telling Decrypt, "There are the FTX asset sales ‘stock overhangs’ potentially to deal with too.”

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