Crypto investment products see biggest exit on record amid SVB collapse
Cryptocurrency investment products lost 10% of assets under management last week as institutional investors rushed out during the latest episode of market volatility stemming from the collapses of Silvergate and Silicon Valley Bank.
Digital asset investment products recorded $255 million in outflows for the week ended March 12, marking the fifth straight weekly decline and the biggest seven-day drop on record, according to CoinShares. The 10% decline in assets under management, or AUM, reversed all gains in 2023.
As the largest and most influential crypto-asset, Bitcoin (BTC) witnessed a move of $244 million. Ether (ETH) products lost $11 million in AUM, while multi-asset funds gained $2.2 million.
Year-to-date flows are now negative for Bitcoin, Ether and multi-asset funds. Although short-Bitcoin products recorded smaller outflows last week, these assets have seen $49 million in total inflows this year.
Investors were on edge last week after Silvergate Bank, a crypto-friendly financial institution, announced it would wind down operations and liquidate all remaining assets. Earlier this month, Silvergate announced it would delay filing the required paperwork with the United States Securities and Exchange Commission, prompting widespread fears about its financial position. Like other companies, Silvergate’s problems stemmed from its involvement with the now-failed FTX cryptocurrency exchange.
Related: Crypto Biz: Silvergate Closes, Alameda Sues Grayscale
@federalreserve @USTreasury @FDICgov Issue Statement on Actions to Protect the American Economy by Strengthening Public Confidence in Our Banking System and Ensuring Depositors’ Savings Remain Safe: https://t.co/YISeTdFPrO
— Federal Reserve (@federalreserve) March 12, 2023
Adding to last week’s chaos was the sudden shutdown of Silicon Valley Bank (SVB), a financial institution with deep ties to crypto-focused venture capital funds. Although the bank was allowed to fail, the Federal Reserve, the US Treasury and the Federal Deposit Insurance Corporation confirmed over the weekend that they would guarantee all SVB deposits.
Yes, the FDIC bailed out Bitcoin.
— Nassim Nicholas Taleb (@nntaleb) March 13, 2023
The resolution of the SVB collapse appears to have boosted confidence in the crypto sector, leading to broad market gains for Bitcoin and other crypto assets. Bitcoin’s price hit as high as $24,639 on March 13 after falling below $20,000 the previous week, according to data from Cointelegraph Markets Pro.
