Institutions are hesitant to invest in Bitcoin, crypto – here’s why

by James · October 4, 2022

The latest insights into digital asset investment products (DAIPs) and their weekly figures highlight a worrying trend. Needless to say, such a trend is also coming to the attention of investors.

The reportpublished by CoinShares, found that last week marked the third consecutive decline in supply to these investment products. With a relatively low inflow of $10.3 million, CoinShares head of research James Butterfill concluded that institutional sentiments towards DAIPs are hesitant right now.

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DAIP Providers

Source: CoinShares

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

The popular Bitcoin ETP provider 21Shares made a dent in the offerings from 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, but almost $300 million. This, in contrast to slightly more than 708 million dollars that it currently has under management.

Asset-wise flows

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

The inflow of $16.4 million from Sweden was offset by Germany’s outflow worth $9.1 million.

With more than $18 billion in assets under management, the US recorded a relatively modest inflow of $7.7 million.

Trading volume for DAIPs during the current week was $886 million – the lowest since October 2020.

Probable reasons for reduced inflow?

Increased scrutiny from regulators, as well as the strengthening of the US dollar, have been identified as possible reasons for the poor performance of these products. According to Butterfill,

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

The upcoming midterm elections scheduled for November are expected to have a major impact on politics and regulations surrounding the crypto industry. With crypto firms working around the clock to lobby for pro-crypto policies and push crypto-friendly candidates, it is possible that a more bullish trend will emerge towards the end of the year.

Regulatory clarity and reduced interference with the broader crypto industry will do much to encourage institutional investors to start pouring money into DAIPs again.