Institutions Ramp Up Crypto Exposure As Weekly Volume Plummets: CoinShares

Weekly inflows into digital asset funds climbed by the most since late March even as volumes dropped, according to CoinShares’ latest Digital Asset Fund Flows Weekly Report.

Major institutions added $932 million in cryptocurrency to their portfolios last week, the report said, while volume dropped by 75% from March to $10.5 billion. The seven days ended on May 19 mark the second weekly inflow in a row after four weeks of outflows.

The additional $932 million brings the yearly total for institutions to a whopping $13.8 billion.

An age-old adage dubbed “sell in May and go away” appears to be in full force. Seasonal behavior among traders, with activity dropping as summer approaches, explains lower volumes. Meanwhile, inflows remain strong as institutions continue to load up on digital assets thanks to spot ETFs.

The disparity, according to James Butterfill, head of Research at CoinShares, “signifies that the hype around the launch is over and now it's trading more on fundamentals.” He told The Defiant, however, that volume continues to be higher than the $2 billion weekly average from 2023.

Last week, major firms responded swiftly to the U.S. CPI report that showed signs of inflation beginning to slow down, leading to a significant bounce in prices across the crypto market. On May 15, the U.S. Bureau of Labor Statistics reported that consumer prices had dropped for the first time in six months.

Butterfill added that the latter three days of trading–once the report had been published–represented 89% of all institutional trading, “highlighting our view that Bitcoin prices have recoupled to interest rate expectations.”

Grayscale Stumps Analyst

After suffering $16.6 billion in outflows since the launch of the Bitcoin ETF on Jan. 11, Grayscale saw minor inflows the past week for the first time, increasing its crypto holdings by $18 million.

“I’m stumped regarding Grayscale,” said Butterfill. “It's a much higher cost product, my only idea is that every ETF needs due diligence, and if you already have an issuer onboarded it saves a whole load of due diligence for a fund manager.”

So why are investors using it? “Simply ease of access,” he said.

It'a All About Bitcoin

Bitcoin was most favored by large firms with $942 million in inflows on the week, hinting at an overall positive sentiment. Over the course of the month, institutions have accumulated $790 million in BTC, which brings the yearly total to $13.5 billion.

On the other hand, the least favored asset by big funds continues to be Ethereum. The asset registered outflows worth $23 million, notching the monthly total to $46 million offloaded. Year to date, $57 million has left institutional coffers.

Most other cryptocurrencies registered minor accumulation from institutions. Large players added $4.9 million in SOL over the past week, along with $3.7 million in Chainlink, and $1.9 million in XRP.

Entities from the United States continue to dominate over their European, Asian, and Latin American counterparts. More than $1 billion in inflows went to U.S.-based funds, while Hong Kong turned bearish with $82 million exiting companies.