Crypto Investment Products Saw $2.25 Billion Inflows In 2023, The Third-Largest So Far

A recent report from CoinShares reveals that crypto investment products experienced significant growth in 2023, with inflows totaling $2.25 billion for the full year. This marks the third-largest year for inflows since 2017, trailing behind 2020 with $6.6 billion and 2021 with $10.7 billion. The notable aspect is that these inflows were 2.7 times higher than those seen in 2022, indicating a substantial turnaround for the asset class.

Crypto Inflows for 2023

The surge in inflows was particularly evident in the final quarter, coinciding with increasing indications that the U.S. Securities and Exchange Commission (SEC) was becoming more receptive to the launch of Bitcoin spot-based exchange-traded funds (ETFs) in the United States. The total assets under management (AuM) for crypto investment products increased by 129% throughout the year, reaching $51 billion, the highest level since March 2022.

Bitcoin emerged as the primary beneficiary of the improved investor sentiment, attracting $1.9 billion in inflows, constituting 87% of the total flows. This dominance is the highest in history, surpassing the prior peak in 2020, where Bitcoin received 80% of the flows. Ethereum also experienced a recovery in inflows, reaching $78 million by the end of the year, albeit representing only 0.7% of the total AuM. In contrast, Solana garnered $167 million in inflows, constituting 20% of AuM, benefiting from investor hesitancy on Ethereum.

In terms of geographical distribution, the United States recorded the largest inflows at $792 million, but this represented only 2% of AuM. Germany led in inflows relative to AuM, with 22%, followed by Canada and Switzerland at 15% and 13%, respectively. The U.S. lagging behind could be attributed to investor preferences for a spot-based ETF.

The positive momentum extended to blockchain equities, with AuM rising by 109%, accompanied by total inflows of $458 million, marking a 3.6x increase compared to 2022. The report underscores the resurgence of interest and investment in digital assets, driven by factors such as regulatory developments and growing investor confidence.

Institutional Money Coming In 2024?

With the approval of Bitcoin ETF next week, institutional money will come into Bitcoin and the broader cryptocurrency market going into 2024. Furthermore, with the Fed likely to cut interest rates, the liquidity easing will lead to more inflows in the market.