Crypto-Related Funds Witnesses Slow Down of Money Outflow

The third quarter of 2022 has witnessed a slowdown in money flowing out of crypto-related funds, according to a report from Bloomberg.shutterstock_2104097378 i.jpg

The report added that the slowdown is a possible sign that many investors might have already withdrawn from the risky asset class.

Data compiled by Bloomberg Intelligence showed that $17.6 million was withdrawn by investors from crypto exchange-traded funds in the three months ending September 30.

By Sep 30, that number had fallen below the record $683.4 million withdrawn from such funds in the second quarter, the data analysis showed.

According to the report, the past two months had witnessed the most outflows. Upwards of $200 million were poured by investors into crypto ETFs in July.

The high degree of outflows in the second quarter was in relation to plunging cryptocurrency prices. The world’s largest digital asset based on market value, bitcoin, fell nearly 60% during the second quarter of 2022 and posted a record low of $17,785 on June 18. However, the cryptocurrency rose 3.7% in the third quarter.

The report stated that narrower price fluctuations aligned with the more muted crypto-linked ETF outflows in the third quarter. On Sep 30, bitcoin was trading above $19,400 – a range close to its prices at the beginning of the quarter.

Todd Sohn, ETF strategist at Strategas Securities, told Bloomberg, “I wonder if the second quarter was the ‘get me out part of these funds.” 

He added that the third quarter saw “some laggards” and investors who are just “keeping the faith mentality” and waiting for crypto to rebound.

With central banks around the world raising interest rates to curb soaring inflation, global banks have sunk in the past few months, and risky investments such as cryptocurrencies have fallen victim as recessionary fears rise.

“Everything’s more correlated right now,” Stephane Ouellette, chief executive officer of FRNT Financial Inc. – a crypto brokerage firm – told Bloomberg. 

“The people buying the ETF are in the same position as the people who are in Bitcoin,” he said. “Everyone’s panicking, so they’re acting the same.”

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Signature Bank Suffers $4.27 Billion Crypto Deposit Outflows

Signature Bank, a New York-based commercial bank, published Wednesday its trading update for the mid-Q3 quarter of this year. The bank reported that deposit withdrawals from the bank totalled $4.27 billion as cryptocurrency fear spreads.

In other words, the bank said a $4.27 billion fall in crypto outflows is to blame for a decline in its spot deposit balances.

However, the bank said it is “well-positioned to reach the target of combined loans and securities growth” for the third quarter despite pressure from the outflows of digital assets.

In contrast, Signature said non-crypto deposits increased to $2.64 billion quarter-to-date, with “specialist mortgage banking solutions” accounting for the majority of that sum ($2.29 billion).

The crypto winter has been brutal this year. So far, the share price of Signature bank has decreased 49% since the beginning of this year. This has been attributed to the ongoing harsh crypto winter.

Due to a surge in crypto industry deposits, Signature Bank had one of the best years among banks last year. But all that changed this year.

Uncertainty still pervades the crypto market because of the fallen token values and the impacts of CeFi bankruptcies.

Joe DePaolo, the CEO of Signature Bank, talked about the development and said that the bank has no direct exposure to cryptocurrencies because it only retains the cash deposits of its clients in dollars.

DePaolo said the bank’s growth does not depend on the growth of the digital currency ecosystem. The executive added that while the company’s exposure to the crypto ecosystem remains a headwind, the bank has grown loans at an annualized rate of 25.4% and deposits (ex-digital assets) by 26.3%.

Signature Bank offers financial services to institutional cryptocurrency traders and related firms, including exchanges and miners.

Of course, Silvergate Bank and Signature Bank are the only two U.S. institutions that are crypto-friendly, operating real-time payment networks.

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ETFs are eating the world: The $37bn Vanguard Total International Stock ETF hasn’t posted an outflow in 1,247 days (since July 25, 2017), BBG data show. The fund, which invests in global equities excluding US, has seen net withdrawals only on 4d since it started trading in 2011.

#ETFs are eating the world: The $37bn Vanguard Total International Stock ETF hasn’t posted an outflow in 1,247 days (since July 25, 2017), BBG data show. The fund, which invests in global equities excluding US, has seen net withdrawals only on 4d since it started trading in 2011. https://t.co/hh3rwxxjmO

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Bitcoin (BTC) $ 26,498.10 0.28%
Ethereum (ETH) $ 1,589.31 0.11%
Litecoin (LTC) $ 64.20 1.13%
Bitcoin Cash (BCH) $ 207.40 0.18%