Crypto Market Outflows Continue for 8th Week Amid Rising Rates and SEC Actions

The cryptocurrency market has recorded its eighth consecutive week of outflows, driven by ongoing monetary policy concerns and mounting regulatory pressures. According to a report by CoinShares, outflows from digital asset investment products reached US$88 million last week, cumulating an 8-week total of US$417 million. This ongoing trend is inching towards last year’s record 12-week run of outflows, primarily attributed to the uncertainty surrounding continuous interest rate hikes.

The outflows were largely focused on North America, with one provider accounting for 87% of the total outflows. In Europe, Switzerland bucked the trend with minor inflows of US$9.2 million, while Germany reported outflows of US$9.4 million.

Bitcoin and Ethereum, the two leading cryptocurrencies, were not immune to the trend. Bitcoin saw US$52 million in outflows last week, bringing the total for the past 8 weeks to US$254 million or 1.2% of total assets under management (AuM). Ethereum, despite experiencing its largest single-week outflow of US$36 million since last September’s Merge, has fared comparatively better with total outflows representing 0.6% of AuM.

The altcoin market has shown mixed results. Litecoin, XRP, and Solana experienced minor inflows, while Polygon suffered outflows. Notably, altcoins have, on aggregate, seen inflows year-to-date, contrasting the outflows from Bitcoin and Ethereum.

Regulatory actions are likely contributing to these market movements. The U.S. Securities and Exchange Commission (SEC) filed a lawsuit against Binance, one of the world’s largest cryptocurrency exchanges, and its founder CZ on June 5 for alleged violation of U.S. securities rules. The SEC proceeded to take similar actions against Coinbase on June 6.

The SEC has classified several tokens related to Binance, including BNB and BUSD, and other cryptocurrencies like SOL, ADA, and MATIC as securities. The SEC also argues that various other cryptocurrencies traded on Binance.com and Binance.US, and a group of 13 cryptocurrencies traded on Coinbase, were “offered and sold as securities”.

These regulatory moves have rocked the altcoin market. Over the weekend, many altcoins, particularly those identified as securities by the SEC, experienced significant value drops.

As monetary policy issues continue to affect investor sentiment, the added uncertainty from regulatory actions further underscores the volatility and risks inherent in the crypto market. These trends highlight the need for investors to remain vigilant and informed about these evolving challenges.