Crypto investment products have suffered record outflows at the start of 2022 as investors lost their appetite for risk.
An explosion of interest in the crypto space in 2021 boosted demand for investment vehicles and products offering exposure to crypto assets. However, the trend has undergone a reversal according to data from Cryptocompare, first reported on by the FT, which showed that outflows began outpacing inflows after investors were spooked by a crypto market dip which saw Bitcoin tumble from highs of $69,000 in November to less than $40,000 at the start of 2022.
Investors pulled out an average of $61m from digital asset vehicles every week in January, the quickest pace of withdrawals in at least a year according to Cryptocompare.
Grayscale Bitcoin Trust, an investment which does not allow investors to withdraw funds, saw stocks dip by as much as 25 per cent as wary shareholders cashed out.
Michael Sonnenshein, chief executive of Grayscale Investments, told the FT that institutional investors sold off digital asset holdings alongside other growth stocks as they awaited an interest rate hike from the US Federal Reserve.
“Its important to note that there’s still significant investor demand for digital asset investment products, but institutions seemingly reacted to the Fed by offloading their positions,” Sonnenshein said.
“Crypto has definitely correlated more to risk assets that was expected. In the last month, it has acted more like a tech stock than anything else,” the chief investment officer of Purpose Investments, Greg Taylor, told the FT.