Cryptocurrency investment products lost 10% of assets under management last week as institutional investors rushed to exit amid the latest wave of market volatility sparked by the collapse of Silvergate and Silicon Valley banks.
According to CoinShares, digital asset investment products saw outflows of $255 million in the week ended March 12, marking the fifth straight weekly decline and the largest seven-day decline on record. Assets under management (AUM) fell 10%, giving up all of its 2023 gains.
Bitcoin (BTC), the largest and most influential crypto asset, has seen a $244 million drop. Ether (ETH) products lost $11 million in AUM, while multi-asset funds gained $2.2 million. Year-to-date flows for bitcoin, ethereum and multi-asset funds are now negative. While short bitcoin products saw small outflows last week, total inflows into these assets have reached $49 million this year. Investors were nervous last week after crypto-friendly financial institution Silvergate Bank announced it would wind up its business and liquidate all remaining assets. Earlier this month, Silvergate announced it would delay a necessary filing with the Securities and Exchange Commission, raising widespread concerns about its finances. Like other companies, Silvergate's problems stemmed from its involvement in the now-defunct FTX cryptocurrency exchange.
Adding to the chaos last week was the sudden closure of Silicon Valley Bank (SVB), a financial institution with deep ties to cryptocurrency-focused venture capital funds. While banks were allowed to fail, the Fed, US Treasury and FDIC confirmed over the weekend that they would guarantee all SVB deposits.
The resolution of the SVB debacle appeared to boost confidence in the crypto industry, leading to a broad market rally for Bitcoin and other crypto assets. The price of bitcoin reached as high as $24,639 on March 13 after falling below $20,000 last week.
