Investors flock to short crypto funds, products as negative sentiment deepens ‑CoinShares

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NEW YORK, Nov 21 (Reuters) — Insti­tu­tion­al investors rushed to cryp­to prod­ucts that bet on price declines, post­ing record inflows, as the col­lapse of dig­i­tal asset exchange FTX rip­pled across the indus­try and sig­nif­i­cant­ly weighed on mar­ket sen­ti­ment, accord­ing to week­ly data from dig­i­tal asset man­ag­er Coin­Shares released on Monday.

Cryp­to prod­ucts and funds saw inflows of $44 mil­lion, as of the week end­ed Nov. 18, but 75% of those flows rep­re­sent­ed invest­ments in short cryp­to prod­ucts, data showed.

The total assets under man­age­ment have plunged to $22 bil­lion, the low­est in two years, Coin­Shares said.

FTX filed for bank­rupt­cy pro­tec­tion in the Unit­ed States more than a week ago in the high­est-pro­file cryp­to implo­sion to date. FTX’s down­fall came after traders with­drew $6 bil­lion from the plat­form in three days and rival exchange Binance aban­doned a res­cue deal.

Last week, the exec­u­tive hired to steer FTX Group through bank­rupt­cy, John Ray, offered his first find­ings of improp­er fund trans­fers and poor account­ing at the col­lapsed cryp­to exchange, describ­ing it as a “com­plete fail­ure” of controls.

“Even for cor­po­rate fraud his­to­ri­ans, the scope and audac­i­ty of FTX’s con defies imag­i­na­tion,” said Matt Weller, glob­al head of research, at FOREX.com and City Index.

He added, refer­ring to FTX’s for­mer chief exec­u­tive offi­cer, Sam Bankman-Fried, “For traders and investors, every word that comes out of SBF’s mouth at this point increas­es the like­li­hood of harsh­er reg­u­la­tions in the cryp­to space, both in the U.S. and else­where, and token prices are like­ly to remain under pres­sure as long as fears over the reg­u­la­to­ry ham­mer falling loom.”

In a con­ver­sa­tion with a Vox reporter pub­lished last week, Bankman-Fried blamed FTX’s col­lapse in part on “messy account­ing,” expressed regret at his deci­sion to file for bank­rupt­cy and den­i­grat­ed U.S. reg­u­la­tors in pro­fane terms. He lat­er said he did not intend for the con­ver­sa­tion to be made public.

Coin­Shares data also showed that bit­coin post­ed inflows of $14 mil­lion, but when off­set by inflows into short invest­ment prod­ucts, the net flows were a neg­a­tive $4.3 mil­lion. The AUM on short-bit­coin was at $173 mil­lion, not far from a high of $186 million,

There were minor out­flows of $800,000 for Ethereum, the sec­ond-largest blockchain net­work. Investors poured in record inflows to short-Ethereum prod­ucts of $14 million.

There was a slew of out­flows across most alt­coins, most notably Solana, XRP, Binance and Polygon.

Report­ing by Gertrude Chavez-Drey­fuss in New York
Edit­ing by Matthew Lewis

Our Stan­dards: The Thom­son Reuters Trust Principles.

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