CoinShares, a leading crypto asset investment firm, reported a substantial inflow of $2.2 billion into digital asset investment products in 2023. This figure represents a notable increase of 2.7 times over 2022 inflows, making this the third largest year for such investments since 2017.
According to James Butterfill, head of research at CoinShares, this increase signals a significant shift in investor sentiment and market dynamics compared to the previous year.
Despite this rebound, inflows remained below record highs of $10.7 billion in 2021 and $6.6 billion in 2020. Butterfill attributes much of the recovery to the final quarter of the year, noting:
[This was] where it became increasingly clear that the SEC was preparing to launch bitcoin spot-based ETFs in the United States.
Various investment trends in crypto funds
Bitcoin investment products were the main beneficiaries, accounting for $1.9 billion or 87% of annual inflows. This dominance of Bitcoin-related inflows marks the largest percentage allocation to date, surpassing the previous peak of 80% in 2020 and significantly higher than the 42% seen five years ago in 2017.
Butterfill saw no clear trend in this allocation, suggesting that the hype surrounding the US SEC-approved spot ETF could be a contributing factor.
In contrast, Ethereum investment products saw a modest recovery in inflows towards the end of the year, totaling $78 million. However, this represented only 0.7% of Coinshares’ total assets under management (AUM). On the other hand, Solana’s investment products recorded inflows of $167 million in 2023 or 20% of the company’s total assets under management.
The US led the way in dollar inflows, with $792 million, followed by Germany with $663 million and Canada with $543 million. However, when analyzing inflows as a percentage of assets under management, the US saw a modest increase of 2%, while Germany and Canada witnessed more significant growth of 22% and 15% of assets under management respectively.
This disparity indicates a regional variation in investor preferences and strategies, especially in the US, where the expectation of a spot-based ETF may have influenced investment choices, Butterfill said.
Overall, assets under management at these funds increased by 129% over the year, reaching a high of $51 billion, a value not seen since March 2022. Blockchain stocks also saw a surge, with inflows increasing 3.6 times to $458 million in 2023, resulting in a 109% increase in assets under management.
Recent market recovery following Matrixport report
However, the crypto market is not without recent turmoil. The market suffered one setback after one bearish report by Matrixport, which speculated on the rejection of spot Bitcoin ETFs by the US SEC.
This report caused a brief market decline, with Bitcoin and Ethereum experiencing significant declines. Nevertheless, both cryptocurrencies are showing signs of recovery, with Bitcoin regaining the $43,000 mark and Ethereum rising above $2,200.
Featured image from Unsplash, chart from Tradingview
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