Bitcoin outflows accelerate as ‘summer doldrums’ set in, altcoins see minor inflows

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(Kitco News) – Outflows from digital asset investment products accelerated last week as the latest data provided by CoinShares shows that a total of $107 million was pulled from various institutional products, with Bitcoin (BTC) accounting for the majority of outflows.

According to James Butterfill, Head of Research at CoinShares, the increase in outflows comes as “profit taking [has gathered] pace in recent weeks,” with Bitcoin experiencing the largest weekly outflow since March for the week ending August 4.

“The summer doldrums are in full force with weekly trading volumes in investment products 36% below the year-to-date average, but the broader on-exchange market volumes have suffered more, down 62% relative to the YTD average,” Butterfill said.

Weekly crypto asset flows. Source: CoinShares

Canadian exchange-traded product (ETP) providers accounted for the largest outflows, with $71 million exiting these products, while German ETPs experienced $29 million in outflows.

Flows by country. Source: CoinShares

Bitcoin bore the brunt of outflows, with $111 million worth of funds exiting these products in the largest drawdown since U.S. regulators began ramping up their scrutiny and enforcement actions against the industry. “For the first time in 14 weeks, the outflows into short bitcoin have stopped,” Butterfill said.

Flows by asset. Source: CoinShares

Ethereum products saw $6 million worth of outflows, bringing the total amount pulled from BTC and ETH to $117 million.

While ETPs for the top two cryptos saw a decrease in AUM, sentiment in the altcoin market improved as evidenced by inflows into multiple projects.

Solana (SOL) had the biggest increase with $9.5 million of inflows, its largest single week of inflows since March 2022. XRP and Litecoin (LTC) saw inflows of $0.5 million and $0.46 million, respectively. Uniswap (UNI) and Cardano (ADA) saw outflows of $0.8 million and $0.3 million, respectively.

While digital asset products are seeing outflows, on-chain data shows that long-term Bitcoin hodlers continue to accumulate BTC in preparation for the next major bull market cycle.

According to the latest analysis from Bloomberg Intelligence’s Jamie Coutts, the data shows that Bitcoin “tourists are inactive while residents are accumulating swiftly, owning 74.8% of all [BTC] supply.”

“That’s consistent with an early-stage bull market,” he said. “Thirty percent of BTC has left for cold storage since 2020, leaving exchanges with 2.26 million.”

Coutts added that “Bitcoin seems fairly valued relative to the number of active entities on the network [as seen in the z- score on the chart below],” and said, “Our simplified price/cycle model sees BTC near $39,000 by 4Q23 and $92,000 (our base scenario) by 4Q25 with entities above 600,000.”

Bitcoin entities and halving. Source: Glassnode

“We can see the impact of activity in ordinal inscriptions and BRC-20 (a standard for tokens) on the chain,” Coutts said. “Transactions are averaging 4x the 2021/22 average of 100,000 per day, despite a fading since the initial craze in 1Q.”

Bitcoin transactions vs. median transactions (dollars). Source: Glassnode

As for the sentiment of the broader cryptocurrency community, data provided by Alternative shows that the Crypto Fear & Greed gauge remains in neutral territory.

Crypto Fear & Greed Index. Source: Alternative