Massive Crypto Selloff Shakes ETP Market

A wave of panic is blowing over crypto ETPs. In the space of one week, over 2 billion dollars have been withdrawn from these financial products, marking their largest outflow since February. This is a strong signal for an institutional market plagued by doubt, amid economic uncertainties and monetary tensions. As traditional markets waver, investors are reassessing their exposure to cryptos. This situation could mark a turning point in the strategy of major holders.

A Massive Capital Outflow Disrupting the Balance of ETP

Exchange-traded products backed by cryptos (ETPs) experienced an unprecedented pullback last week, while inflows were still significant last July.

According to CoinShares data, net outflows amounted to 2 billion dollars, marking the largest weekly outflow since February. “This brings the total outflows to 3.2 billion dollars over three weeks,” specifies James Butterfill, head of research at CoinShares.

He points to uncertainty about monetary policy and significant sales from whales in the native ecosystem as the main drivers of this massive withdrawal. As a result, assets under management (AUM) of crypto ETPs have dropped to 191 billion dollars, a 27 % decrease from the October peak, when they reached 264 billion.

The detailed figures confirm the scope and geographical reach of the movement. While the United States accounts for the bulk of capital outflows, other markets have also been affected. Here are the key data to note :

• United States : 1.97 billion $ in net outflows (97% of total outgoing flows) ;
• Switzerland : 39.9 million $ in outflows ;
• Sweden : 21.3 million $ in outflows ;
• Hong Kong, Canada, and Australia (combined) : 23.9 million $ in outflows ;
• Germany : 13.2 million $ in net inflows (the only country in positive territory).

At the asset level, ETPs backed by bitcoin suffered withdrawals of 1.4 billion dollars, about 2 % of their total assets, while products linked to Ethereum lost 700 million dollars, representing nearly 4 % of their AUM.

Products exposed to XRP and Solana are also not spared, with outflows of 15.5 million $ and 8.3 million $ respectively. This wave of disinvestment, sudden and concentrated, reflects a profound repositioning of investors on a global scale.

Towards a Strategic Reallocation : Between Diversification and Hedging

While massive outflows of individual assets seem to reflect widespread distrust, inflows observed in other products reveal a more nuanced strategy from investors.

Indeed, multi-asset ETPs that offer diversified exposure to several cryptos have recorded capital inflows of 69 million dollars over the past three weeks. Meanwhile, funds that allow betting on the decline of the BTC price have also attracted 18.1 million dollars over the same period.

This reorientation is explained by a growing need for protection against global economic uncertainties, especially regarding monetary policy. Extended rate hikes by the US Federal Reserve, coupled with conflicting economic data, have fueled a wait-and-see sentiment in the markets.

In this context, some institutional players adopt a more defensive stance, preferring to spread risk rather than expose themselves to a single asset. Others, betting on a new correction, take short positions via short products. This repositioning logic does not necessarily reflect a loss of faith in crypto fundamentals but rather a tactical adaptation to an environment deemed uncertain.

In the medium term, this trend could have significant repercussions. On the one hand, it could weaken the liquidity of single-asset ETPs, increasing volatility in underlying markets. On the other hand, the rise of multi-asset products could encourage issuers to further diversify their offerings to meet more sophisticated exposure needs. Let us hope then that this market regains some color again.