Institutional inflows into crypto hit lowest levels since October

Capital flows into cryptocurrency investment products rose again last week, though the pace of growth has slowed since the start of the year, possibly marking a local top in institutional demand. 

Net inflows totaled $21 million for the week ending March 27, 2021, according to Coinshares, a European digital-asset manager. That was the lowest level since October 2020 when Bitcoin (BTC) was trading sub-$14,000.

Coupled with low investment volumes, investor appetite for crypto assets appears to have waned. The decline coincided with the lackluster price performance of major assets like Bitcoin and Ethereum (ETH), which have been unable to test new highs in recent weeks. Daily trade volumes for digital asset products fell to $788 million last week compared with $900 million for the whole of 2021.

Coinshares noted that profit-taking was also in play as investors sitting on large unrealized gains decided to take some off the table.

“We have recently witnessed a significant reduction in inflows and in some cases outflows, for the larger and longer established pre-2016 investment products,” the asset manager said, adding:

“... we believe this is due to investors sitting on multi-year gains taking profits.”

Although Bitcoin investment products generated nearly half of the total weekly inflows, on a market capitalization-adjusted basis, Ethereum products were the most popular. Inflows into ETH investment funds rose by $5.4 million last week.

Total inflows increased for 21Shares and the Purpose exchange-traded fund but declined for CoinShares and virtually flat-lined for Grayscale.

Despite the modest pullback in inflows, institutional investors remain a driving force behind the cryptocurrency bull market. As Coinshares reported last week, crypto assets held by institutional investment managers have topped $57 billion. And while Bitcoin and Ethereum continue to trade below all-time highs, the total cryptocurrency market capitalization rose to near-record levels on Monday. The total crypto market cap peaked just north of $1.83 trillion, according to CoinMarketCap.