Institutional crypto products get off to a rocky start in 2022
Institutional investors pulled a record amount of money from cryptocurrency investment products last month, according to a report published by the Financial Times that cites data from crypto analytics firm CryptoCompare.
Releases averaged $61 million per week in January, marking a rocky start to the first quarter of 2022. In the first quarter of 2021, for comparison, the industry recorded a record $4.5 billion. of entries.
Grayscale CEO Michael Sonnenshein attributes the slump to Federal Reserve’s impending hawkish shift:
Importantly, there is still significant investor demand for digital asset investment products, but institutions have apparently reacted to the Fed by offloading their positions.
Analysts anticipate at least three rate hikes this year, but some are prepared to see up to five of them by the start of 2023.
Shares of Grayscale Bitcoin Trust (GBTC) hit a massive discount of 29.8% on January 21, according to data provided by YCharts.
While the company plans to convert the fund into an ETF, it remains highly unlikely that it will be able to pull this off anytime soon.
Earlier this week, the United States Securities and Exchange Commission postponed its decision on Grayscale’s application after rejecting several proposals to launch a spot Bitcoin ETF.
Bitcoin, which resumed its rally in October because of the launch of the first futures-based ETF, plunged 16% in January, with the hawkish narrative perpetuated by the Fed pushing risky assets much lower. Despite the massive correction, the fact that cryptocurrency investment vehicles continue to bleed funds suggests that investors are hesitant to buy the dip. Daily volumes of the 50 products tracked by CryptoCompare dipped to their lowest volume since July.
The major cryptocurrency is now trading slightly above $41,600 on major spot exchanges.
