Cryptocurrency investment products saw the largest outflows since records began last week, as institutional investors pulled out amid instability caused by the Silvergate and Silicon Valley Bank crises.
Digital asset investment products had $255 million withdrawn during the week ending March 12, marking the fifth consecutive weekly decline and the greatest seven-day decrease ever, CoinShares reported. AUM (Assets Under Management) dropped by 10%, erasing all the gains made in 2023.
As the most significant and influential crypto asset, Bitcoin (BTC) experienced a $244-million drawdown, while Ether (ETH) products saw $11 million in AUM withdrawn. Multi-asset funds, however, gained $2.2 million.
Year-to-date flows are now negative for Bitcoin, Ether and multi-asset funds. Short-Bitcoin products registered minor outflows last week, but have seen $49 million in total inflows this year.
Investors were worried last week when Silvergate Bank, a crypto-friendly financial institution, declared it would be shutting down operations and liquidating all remaining assets. At the beginning of the month, Silvergate said it would put off filing the necessary paperwork with the United States Securities and Exchange Commission, which caused widespread concerns about its financial position. The bank’s difficulties were also connected with the now-failed FTX cryptocurrency exchange.
Related:Crypto Biz: Silvergate closing, Alameda suing Grayscale
@federalreserve @USTreasury @FDICgov issue statement on actions to protect the U.S. economy by strengthening public confidence in our banking system, ensuring depositors’ savings remain safe: https://t.co/YISeTdFPrO
— Federal Reserve (@federalreserve) March 12, 2023
Adding to last week’s chaos was the abrupt closure of Silicon Valley Bank (SVB), a financial institution with close ties to crypto-focused venture capital funds. Although the bank was allowed to fail, the Federal Reserve, U.S. Treasury and Federal Deposit Insurance Corporation affirmed over the weekend they would back all SVB deposits.
Yes, the FDIC bailed out Bitcoin.
— Nassim Nicholas Taleb (@nntaleb) March 13, 2023
The resolution of the SVB collapse seems to have bolstered confidence in the crypto sector, leading to wide market rallies for Bitcoin and other crypto assets. Data from Cointelegraph Markets Pro shows that Bitcoin’s price rose as high as $24,639 on March 13 after dipping below $20,000 last week.
