NEW YORK: Institutional investors rushed to crypto products that bet on price declines, posting record inflows, as the collapse of digital asset exchange FTX rippled across the industry and significantly weighed on market sentiment, according to weekly data from digital asset manager CoinShares released on Monday.
Crypto products and funds saw inflows of US$44 million, as of the week ended Nov 18, but 75 per cent of those flows represented investments in short crypto products, data showed.
The total assets under management have plunged to US$22 billion, the lowest in two years, CoinShares said.
FTX filed for bankruptcy protection in the United States more than a week ago in the highest-profile crypto implosion to date. FTX’s downfall came after traders withdrew US$6 billion from the platform in three days and rival exchange Binance abandoned a rescue deal.
Last week, the executive hired to steer FTX Group through bankruptcy, John Ray, offered his first findings of improper fund transfers and poor accounting at the collapsed crypto exchange, describing it as a “complete failure” of controls.
“Even for corporate fraud historians, the scope and audacity of FTX’s con defies imagination,” said Matt Weller, global head of research, at FOREX.com and City Index.
He added, referring to FTX’s former chief executive officer, Sam Bankman-Fried, “For traders and investors, every word that comes out of SBF’s mouth at this point increases the likelihood of harsher regulations in the crypto space, both in the US and elsewhere, and token prices are likely to remain under pressure as long as fears over the regulatory hammer falling loom.”
In a conversation with a Vox reporter published last week, Bankman-Fried blamed FTX’s collapse in part on “messy accounting”, expressed regret at his decision to file for bankruptcy and denigrated US regulators in profane terms. He later said he did not intend for the conversation to be made public.
CoinShares data also showed that bitcoin posted inflows of US$14 million, but when offset by inflows into short investment products, the net flows were a negative US$4.3 million. The AUM on short-bitcoin was at
US$173 million, not far from a high of US$186 million,
There were minor outflows of $800,000 for Ethereum, the second-largest blockchain network. Investors poured in record inflows to short-Ethereum products of US$14 million.
There was a slew of outflows across most altcoins, most notably Solana, XRP, Binance and Polygon.