Cryptocurrencies suffered a total outflow of value equivalent to $207 million during the first week of the year, according to a report by digital assets hedge fund CoinShares, indicating a persistent bearish outlook that may lead to an ever-heavier loss over the year.
“Bitcoin saw outflows totaling [$107 million] last week in what we believe was a direct response to the [Federal Open Market Committee] minutes which revealed the U.S. Federal Reserve’s concerns for rising inflation, and the fear amongst investors of an interest rate hike,” said the report published Monday.
According to analysts, Bitcoin’s market is mostly divided between long-time value-based digital investors, who believe that the asset will gain in value over time, and traders that are looking to cash in during market volatilities. Cryptocurrencies, like other speculative stocks, have performed well during the past years due to abnormally low interest rates.
The crypto market saw a surge later on in 2021, with Bitcoin hitting a record of almost $69,000. However, since then, the market has crashed with steadily declining fortunes, while Bitcoin currently hovers around the $41,000 mark, a dip of almost 40 percent.
“Over the last 4 weeks we have seen investment products representing up to 25% of total Bitcoin trading turnover, highlighting greater investor activity than usual,” from the CoinShares report.
Meanwhile, the second popular cryptocurrency, Ethereum saw a five-week run which saw $200 million in total outflows, including $39 million last week, a decrease in value greater than that of Bitcoin. Ether currently trades at $3,121, a dip of over 35 percent since its November high.
CoinShares said that multi-asset funds did not face a loss in value as much as individual currencies. Outflows from these funds totaled $37 million, amidst minor inflows for other currencies.
Litecoin, Solana, and Ripple were some of the assets that registered inflows, with $300,000, $500,000, and $800,000 respectively. Crypto-exchanges ETC Group and 21Shares recorded outflows of $88 million and $13 million.
Butterfill ended the report by saying, “Blockchain equities investment products did not escape the negative sentiment with outflows totalling [$10 million] over the week.”
As Bitcoin flirted below the $40,000 level on Monday, technical analysts like Julius de Kempenaer claimed that the cryptocurrency could see a further fall.
“Short traders, who have not been punished for taking on increasing risk, may find themselves candidates for a near-term squeeze.”