Investors Continue Buying Bitcoin, Latest Fund Flows Report Shows – Here’s Why BTC Could Dominate Institutional Crypto Demand

 Investor in crypto. Source: Adobe The most recent Digital Asset Fund Flows report, which is published on a weekly basis by CoinShares and comes one week after digital asset investment products saw their largest weekly inflow of $160 million since July 2022, indicates that the rate of inflows has virtually slowed down.

“Digital asset investment products saw inflows totaling a lackluster US$2.5m, with trading volumes in investment products falling by 33% compared to the prior week,” states the crypto data analytics company.

CoinShares went on to say, "This was reflected in the broader bitcoin market where trading volumes on trusted exchanges fell by 61 percent, with both data points suggesting much less participation in the crypto market than the previous week."

Indeed, as of Monday, the seven-day moving average of volumes was approximately $22.5 billion, down from approximately $46 billion in the middle of March, according to data provided by The Block.

While other cryptocurrencies have also been subject to rangebound conditions, lower volumes come at a time when Bitcoin has been going sideways around $28,000.

Looking beneath the surface, Bitcoin's sentiment is actually more positive than one might anticipate.

Short Bitcoin investment products saw $2.5 million in outflows, while the market capitalization of the largest cryptocurrency in the world saw $8.8 million in inflows.

CoinShares stated that the rise in Bitcoin's price has resulted in the total assets managed's dollar value "at their highest since the collapse of 3 Arrows Capital in June 2022 at US$23.5bn."

Litecoin, Tron, Solana, XRP, and Polygon all saw modest small inflows, while Ethereum and multi-asset products both saw $5.8 million in outflows.

"inflows into short-Ethereum (US$0.5m) suggest investors remained concerned for the upcoming Shanghai upgrade, which will enable un-staking (yield distribution)," states CoinShares.

The amount of Bitcoin held by digital asset managers—which can include trusts and exchange-traded products—has been rising in recent weeks in response to US banking failures in mid-March, according to data from alternative crypto analytics firm CryptoQuant, which instead refers to on-chain data.

 

As of Sunday, fund holdings were at 692,000 BTC, or approximately $20 billion at current prices, according to CryptoQuant, up from 688,000 BTC on March 14.

Since a brief dip to below $20,000 in mid-March, Bitcoin's price has increased significantly to levels above $28,000.

Analysts attribute the cryptocurrency's sharp rebound to two factors: 1) bets that the Fed is nearly finished with its tightening cycle and might soon be cutting interest rates, which has been weighing on US bond yields and the US dollar (and boosting crypto in general), and 2) safe-haven demand amid concerns about a US (and global) bank crisis.

The data provided by CryptoQuant indicate that investors in Bitcoin trusts and exchange-traded products' rising demand must have contributed to the price increase.

Increasing institutional adoption, which has previously been touted as a major long-term driver of cryptocurrency price appreciation, is suggested by a greater proportion of Bitcoin moving toward these kinds of investors.

In the upcoming bull market cycle, institutional demand for cryptocurrencies could be disproportionately dominated by bitcoin.

This is in addition to the fact that many proponents view Bitcoin, the world's first, oldest, and most secure cryptocurrency, as the best safeguard against a traditional financial system banking crisis.

It's also because, in contrast to many other cryptocurrencies, Bitcoin is mostly exempt from regulations.

Take the US Protections and Trade Commission. They have made it clear that they do not regulate Bitcoin because it is a digital commodity, but that the majority of other cryptocurrencies are securities.

These include cryptocurrencies like Ethereum, which the SEC probably views as a security because it offers yield to holders of its Ether token.

A cryptocurrency's risk of being deemed a security is not limited to staking.

After being sued by the SEC in 2020 over its distribution of XRP tokens, which the SEC claims was an unregistered securities offering, Ripple discovered that the manner in which it was initially distributed also posed a risk.

Force appears to be shifted towards Wave winning this claim at the present time, in any case.

Although for the same reasons, there is also a very strong argument that the likes of Litecoin and Dogecoin are also digital commodities, Bitcoin appears to be the only cryptocurrency in the clear at the moment.

As a result, Bitcoin may be more appealing to investors than some of its major competitors, such as Ethereum, Cardano, Solana, and others, which utilize proof-of-stake and are enabled by smart contracts.