A new CoinShares report suggests that there is a "divergence in sentiment from a regional perspective" when investing in cryptocurrencies.
This divergence is especially clear when comparing investors based in Europe with those in the United States, likely due to the stark regulatory differences between each region, reads the report.
"As a U.S. investor, the recent regulatory crackdown from the SEC is very close to home, and has had a definite impact on sentiment," James Butterfill, Head Of Research at CoinShares, told Decrypt. "In Europe, the sentiment is much more constructive, investors now have the well-defined MiCa directive and recent flows data suggests they see the weak sentiment in the US as a buying opportunity."
While Europe has seen a weekly investment into various crypto products of $16 million, the US has pulled out $14 million of the cryptocurrency market.
CoinShares tracks investment in and out of a variety of crypto-related funds, such as Grayscale’s suite of funds as well as the ProShares similar offerings.
Digging deeper into the European trends, Germany saw the region's largest inflows with $18.1 million. Other EU countries like Sweden and France saw little significant in or outflow into the crypto market, with the largest outflow being Switzerland for $2.6 million.
Despite the bullish uptick, European investors remained bearish over the month, with CoinShares reporting outflows over that period of more than $24 million.
Still, U.S. outflows were significantly higher at $67.5 million over the past month. So, what’s driving the recent divergence?
Regulation weighs on investor minds
The CoinShares report speculates that this difference in investor sentiment may stem from regulatory differences.
Over the summer, the European Union entered into force a set of regulations called Markets in Crypto-Assets (MiCA).
The framework is set to be implemented in December 2024 to provide clear rules for crypto assets.
"This framework covers various aspects, including the creation and services related to cryptocurrencies, stablecoins, and similar digital assets," Jon Egilsson, co-founder and chair of Euro stablecoin Monerium, told Decrypt. "MiCA represents a groundbreaking development that is set to significantly influence the crypto landscape in Europe."
In August, the continent's first exchange-traded fund (ETF) in Bitcoin spot markets was also launched with Amsterdam's Jacobi FT Wilshire Bitcoin ETF. Europe has also seen the Gnosis Pay visa-enabled crypto debit card launch.
Meanwhile, the U.S. has struggled to approve high-profile ETFs and is yet to provide regulatory clarity.
"The US regulation is highly complex because of federal laws and state laws, there have been a lot of discrepancies." Anne-Sophie Cissey, head of legal and compliance at Flowdesk, told Decrypt, "Because of those discrepancies and of an inability to reach a consensus, the only voice that has been heard is the SEC’s which want to regulate it as any investment product."
American authorities are also currently engaged in several high-profile lawsuits against some of the biggest players in the industry, including Binance and Coinbase.
"The absence of clear regulations, disputes within the government, and legal uncertainties create a challenging environment for investments in the space and is discouraging," Egilsson said. "Notably, the U.S. Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) cannot agree on which agency has jurisdiction over stablecoins under existing rules."
At least over the near term, these differences are weighing on investors’ minds.