Are crypto investment product assets dead after the FTX explosion?
Crypto assets under management are at an all-time low. Are Crypto Investment Products Assets Dead After FTX Blast?
Institutional clients are primarily exposed to cryptocurrencies through exchange-traded funds (ETFs) or exchange-traded notes (ETNs). They generally avoid direct exposure to crypto because these crypto investment products are regulated and some of them are publicly traded.
The decline in assets under management
Assets under management (AUM) of all crypto investment products peaked in October 2021, when Bitcoin was trading near its all-time highs. As the bear market intensified, the AUM continued to gradually decline this year.
According to a CryptoCompare Reportthe total AUM of all digital asset investment products fell sharply by 14.5% to $19.6 billion in November. The collapse of The Sam Bankman-Fried Empire led to massive turmoil in the crypto market, which was reflected in the AUM.
Venture Capitalists Could Walk Away From Crypto Investment Products
The world’s largest asset managers like BlackRock, Tiger Global and many more have participated in the FTX Series B funding round. The collapse of FTX resulted in in a big bump in the balance sheets of these asset managers because they invested more than $420 million in the Series B round.
BlackRock invested $24 million in FTX last year. According to a New York Times article, Larry Fink, the CEO of BlackRock, has warned that most crypto startups will fail. Larry Fink predicted that the spectacular failure of FTX would lead venture capitalists back to investing in science, not hype.
It is evident from the AUM charts that institutions are withdrawing their capital from crypto. In November, most crypto investment products are giving more than 20% negative returns according to CryptoCompare analysis. Such negative returns could alienate institutions from the crypto industry. If Larry Fink’s predictions are true, crypto investment product assets might not exist for a long time.
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