crypto strategy

FTX crisis drives record inflows into short-term investment products

Institutional investors reacted to the negative sentiment caused by the collapse of FTX, with record institutional inflows into short-term crypto-focused investment products.

According to CoinShares Chief Strategy Officer, James Butterfill, 75% of total institutional investor crypto inflows for the week ending Nov. 18 were placed in short investment products – essentially a bet that crypto prices will fall.

Butterfill said the taking of short positions by investors is likely “a direct result of the continued fallout from the FTX collapse”, while total assets under management (AUM) for institutional investors now stands at 22. billion, the lowest in two years.

During the week, $14 million was invested in short ETH investment products. CoinShares said it was “the largest weekly inflow ever”.

CoinShares cited “renewed uncertainty” on Ethereum upgrade in Shanghai scheduled for September 2023 and mentioned that the important amount of ETH held by the FTX exploiter as possible reasons for the negative sentiment.

Collection in short investment products for Bitcoin (BTC) reached $18.4 million. Short Bitcoin products reportedly have an AUM of $173 million closing in on the high of $186 million.

Investors are also apparently dropping altcoins with Solana (FLOOR), XRP (XRP), IN B (BNB) and Polygon (MATIC) product releases totaling $6 million.

The newly reported entries are a slight change from the previous week which saw the largest entries in 14 weeks to crypto products totaling $42 million, although short bitcoin products have already started to see inflows of $12.6 million and blockchain stock products saw the largest weekly outflow since May 2022.

Related: FTX will be the last giant to fall this cycle: Hedge fund co-founder

Meanwhile, the ripple effect of investor distrust of centralized exchanges moves into the traditional financial market with Coinbase posting an all-time low stock price on November 21.

The crypto exchange’s share price fell 8.9% on the day, slipping below $41 according at Google Finance. It has now recovered slightly to around $41.20 at the time of writing, but continued to trade at a slight negative 0.19% after hours.

Coinbase’s stock price is down nearly 88% since its IPO on April 16, 2021.