Traditional finance fears drive digital asset investment inflows to $160M

On March 27, European cryptocurrency investment firm CoinShares published its “Digital Asset Fund Flows Report,” which revealed that digital assets continue to attract investors’ attention as concerns over the stability of traditional finance (TradFi) continues to grow. 

According to the latest report, investment products in digital assets experienced inflows of $160 million last week, the largest since July 2022, marking a significant reversal after six weeks of outflows totaling $408 million. The report also noted that “while the inflows came relatively late compared to the broader crypto market,” investors are increasingly concerned about the stability of the traditional finance sector.

Investments came from various countries, including the United States, Germany, and Canada, with inflows of $69 million, $58 million, and $26 million, respectively.

According to the report, Bitcoin (BTC) products received inflows of $128 million due to clients viewing it as a “safe haven” for the first time. However, not all investors shared this view, as short-Bitcoin products also saw inflows of $31 million. Nevertheless, short-Bitcoin remains the investment product with the most inflows year-to-date, though it is not the best-performing product from a price perspective.

On the other hand, Ether (ETH) products experienced outflows of $5.2 million last week, marking the third consecutive week of outflows. The report attributes this trend to investor anxiety over the Shanghai upgrade, expected to occur on April 12. Various altcoins also saw inflows, with Solana (SOL), Polygon (MATIC), and XRP products attracting $4.8 million, $1.9 million, and $1.2 million, respectively.

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Overall, the report cited rising concerns over the stability of traditional finance as the reason for the growing interest in digital assets, as many investors are starting to view the sector as a “safe haven.” 

Additionally , over the last couple of weeks, many investors have rotated their portfolio investments due to the banking crisis, which has resulted in the sending of over $286 billion into United States money market funds so far in March, according to Emerging Portfolio Fund Research (EPFR) data obtained by the Financial Times.

The influx of money into money market funds can be attributed to concerns about the stability of the financial system, as banks in the U.S. and Europe are experiencing liquidity constraints due to tightening monetary policies. During times of uncertainty, money market funds are a preferred investment option for many as they offer high liquidity and low risk. Presently, these funds are providing some of the best yields in years due to the continuous interest rate hikes by the U.S. Federal Reserve aimed at curbing inflation.