Institutions are hesitant about investing in Bitcoin, cryptos – Here’s why

The latest insights into digital asset investment products (DAIP) and their weekly numbers highlight a troubling trend. Needless to say, such a trend is bound to come to the attention of investors too. 

The report, published by CoinShares, found that last week marked the third consecutive one with diminishing inflows into these investment products. With a relatively low inflow of $10.3 million, CoinShares’s Head of Research James Butterfill concluded that institutional sentiment towards DAIPs is hesitant right now. 

DAIP Providers

Source: CoinShares

Coinshares XBT accounted for the highest inflows – $16.4 million worth of investments into DAIPs provided by them. Interestingly, Grayscale, with the most amount of assets under management (AUM), had a net 0 flow for the week.

Popular Bitcoin ETP provider 21Shares made a dent in the inflows contributed by other providers. It had a recorded outflow of $3.6 million, CoinShares found.

Since the beginning of 2022, ProShares’ investment products have contributed to the most inflows, however, almost $300 million. This, in contrast to a little more than $708 million that it currently has under management.

Asset-wise Flows 

Bitcoin took the top spot as the asset which contributed to the most inflows with $7.7 million worth of investments. BTC drew investment from not only those who were betting it would go up, but also from those willing to short it. This particular product brought an additional $2.1 million during the week.

The $16.4 million inflows contributed by Sweden was countered by Germany’s outflows worth $9.1 million. 

With more than $18 billion in assets under management, the United States registered a relatively modest inflow figure of $7.7 million. 

The trading volume for DAIPs during the week in question was $886 million – The lowest since October 2020. 

Likely reasons for reduced inflows?

Increased scrutiny by regulators, as well as the strengthening of the U.S Dollar, have been identified as possible reasons for the poor performance of these products. According to Butterfill, 

“Looking back, the Merge was not good for sentiment with outflows totaling US$65m in September. Increased regulatory scrutiny and a strong US Dollar being the likely culprits as the shift to Proof of Stake was executed successfully.”

The upcoming mid-term elections slated for November are expected to have a major impact on policy and regulations surrounding the crypto-industry. With crypto-firms working around the clock to lobby pro-crypto policies and push crypto-friendly candidates, it is possible that a more bullish trend emerges by the end of the year.

Regulatory clarity and decreased crackdown on the broader crypto-industry will do a lot to encourage institutional investors to start pouring money into DAIPs again.