Bitcoin funds saw $453 million outflow last week, wiping out all inflows in the past six months, and Bitcoin fell below $21,000

According to a report from CoinShares , as the crypto bear market continues, Bitcoin funds had a total outflow of $453 million last week, wiping out all inflows in the past six months, and the total assets under management (AuM) of Bitcoin funds was $24.5 billion, the lowest point since the beginning of 2021. Bitpush terminal data showed that in the past 24 hours, Bitcoin fell below $21,000, and the trading price was about $20,700 as of press time, a drop of 2%.

Funds are investment products that give traditional investors exposure to cryptocurrencies without having to custody the cryptocurrencies themselves.

When investors buy crypto-based funds, it is called an inflow and is generally a bullish signal. The opposite process, when investors exit said funds, is called an outflow and is generally bearish.

Last week’s outflows were the third-largest on record in terms of assets under management (AUM), accounting for 1.2% of all AUM across all funds tracked by CoinShares. The worst on record was a 1.6% outflow during the 2018 bear market.

However, in terms of dollar value, last week’s outflows were the largest.

The capital outflow was only concentrated in Bitcoin fund products, while other fund products showed inflows, including Ethereum Fund (US$10.9 million), Short Bitcoin Fund (US$15.3 million), Cardano Fund (US$800,000), Tron Fund (US$100,000), and Polkadot Fund (US$200,000). However, these data could not offset the large outflow of Bitcoin. The total capital outflow of all digital asset investment products was US$423 million.

What caused the outflow of Bitcoin funds?

Recently, central banks, including the Federal Reserve and the Bank of Canada, have implemented interest rate hikes as a response to rising inflation.

The Bank of Canada raised its interest rate from 1% to 1.5% earlier this month. The Federal Reserve also raised its interest rate by 0.75% from 1% to 1.75%.

Rising interest rates typically lead to higher bond yields, which may be more attractive to many investors than crypto funds.

These rate hikes have had a considerable impact on most financial markets, including crypto. According to a report by CoinShares, Toronto-based Purpose Investments’ crypto products suffered outflows of up to $490.7 million, while U.S. crypto fund products saw inflows totaling $41 million.

Crypto markets have also been weighed down in recent weeks by financial difficulties at lending platforms including Celsius, BlockFi and Voyager Digital, as well as hedge fund Three Arrows Capital.

Matthew Dibb, co-founder of Stack Funds, commented that if more crypto lending companies "develop unhealthy balance sheets, we could see further liquidations across the board." Dibb said: "BTC is showing some nice support, but it's too early to get excited about any sustained upside."