Bitcoin investors take profits while altcoin funds see an uptick in engagement

Get all the essential market news and expert opinions in one place with our daily newsletter. Receive a comprehensive recap of the day’s top stories directly to your inbox. Sign up here!

(Kitco News) – The latest data from CoinShares shows that digital asset investment products experienced minor outflows last week as investors took profits amid a market lull following the recent increase in prices.

There was a net total of $6.5 million worth of outflows last week, primarily from Bitcoin (BTC) investment products, after four consecutive weeks of net inflows that totaled $742 million.

Trading volumes also declined, falling from $2.4 billion the week prior to $1.2 billion, a sign that the momentum brought by the spot BTC ETF exchange-traded fund filings at the end of June has now faded.

Weekly crypto asset flows. Source: CoinShares

Investors in North America were the primary source of outflows as they pulled $21 million from investment products, representing 99% of all outflows. This was offset by investors in Switzerland, who increased their digital asset exposure by $12 million, while Germans increased their holdings by $1.9 million.

Flows by exchange country. Source: CoinShares

As was the case with the high level of inflows the previous four weeks, Bitcoin was the primary focus last week with $13 million worth of outflows, while short Bitcoin investment products saw outflows for the 13th consecutive week totaling $5.5 million.

“Short Bitcoin total assets under management (AuM) at its peak represented 1.3% of total Bitcoin investment products,” CoinShares said. “This has now fallen to just 0.4%, the lowest level since June 2022.”

Flows by asset. Source: CoinShares

According to an analysis of Google Trends by crypto gambling experts at cryptogambling.tv, “Searches to ‘sell bitcoin’ were the highest at the end of July in the United States and worldwide.”

Ether investment products experienced $6.6 million worth of inflows, which suggests the sentiment around the top altcoin is improving as investors look past Bitcoin for other solid investments in the space.

XRP also continued to benefit from the recent favorable ruling in the lawsuit filed by the Securities and Exchange Commission (SEC), with $2.6 million flowing into XRR-based products last week, bringing the year-to-date total to $10 million. “This implies investors are increasingly confident in the outlook for XRP,” CoinShares said.

Other altcoin projects that saw inflows last week include Solana ($1.1 million), Uniswap ($0.7 million) and Polygon ($0.7 million).

Spot Bitcoin ETF outlook

Delving into the topic of the waning momentum from the recent spot BTC ETF applications, William Cai, Co-Founder and Managing Partner at Wilshire Phoenix, told Kitco Crypto that while the recent developments have had a positive impact on Bitcoin’s price, “a Bitcoin ETF will not happen in 2023.”

Cai noted the “statutory review period of 240 days” provided to From 19b-4 submissions and said, “If successful, it will be followed by the Form S-1 review of a variable period – likely many months.”

“A complete ETF application review with the given structure likely requires SEC review on both the Form 19b-4 submitted by the listing exchange and also the Form S-1 by the fund sponsor,” he said. This potentially eliminates any first-mover advantage for the firms that submitted their applications early as the time to complete the S-1 review can vary, he added.

Cai also highlighted the risk that Coinbase being named as the surveillance-sharing agreement (SSA) partner poses to the approval of the ETFs.

“The relevant requirement in the 19b-4 review is for an SSA to [be] a ‘regulated market of significant size,’” he said. “Given the SEC lawsuit against Coinbase, we find it difficult that the ‘regulated’ component of the requirement would be satisfied when Coinbase is used as the referenced market for the SSA.”

While Cai thinks that a spot BTC ETF won’t be approved in 2023, he sees the interest from some of the largest asset managers in the world as a good sign for the future of the asset class.