Investor sentiment towards digital assets took a decisive decline last week, with cryptocurrency funds recording weekly outflows of $1.7 billion.
This is the second consecutive week of withdrawals and a reversal of annual inflows to $1 billion in net outflows.
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Digital asset investment products lost $1.69 billion last week, following $1.73 billion outflow from cryptocurrency funds in the week ending January 23. The recent downturn has also accelerated a broader contraction in assets under management (AuM).
Since peaking in October 2025, total AuM across digital asset products has decreased by $73 billion. This reflects both continued price weakness and ongoing capital outflows from the sector.
CoinShares analyst James Butterfill points out that there are a combination of factors behind the recession. The principal investigator comments:
- Appointment of more hawkish US Federal Reserve Chairman
- Ongoing whale sales are associated with a four-year cryptocurrency cycle.
- As geopolitical volatility increases, investors are choosing safer assets.
This explains why outflows were overwhelmingly concentrated in the United States, which accounted for $1.65 billion of total weekly withdrawals.
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“We believe this reflects a combination of factors, including the appointment of a more hawkish US Federal Reserve (Fed) chairman, continued whale selling on a quadrennial basis, and heightened geopolitical volatility,” Butterfill wrote.
The scale of the US departure highlights the sensitivity of cryptocurrency markets to changes in Federal Reserve expectations and broader financial conditions. Elsewhere, sentiment was similarly negative, albeit on a smaller scale.
Widespread outflows highlight defensive shift in cryptocurrency markets
Selling was widespread across individual assets. Bitcoin has been hit hardest by withdrawals. $1.32 billion was lost over the week as investors reduced their exposure to the pioneering cryptocurrency, potentially accounting for the BTC price slump.
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Ethereum recorded outflows of $308 million, reflecting declining confidence in the asset, which is generally viewed as a long-term structural bet.
Likewise, the hottest stocks on the market recently were no exception, with XRP and Solana recording outflows of $43.7 million and $31.7 million respectively.
The chart above represents a shift away from a higher beta position. But amidst the gloom, pockets of defensive positions emerged. Short-term Bitcoin investment products attracted $14.5 million in inflows, increasing year-to-date AuM by 8.1%.
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The move suggests traders are increasingly hedging against further declines rather than positioning for a near-term bounce.
At the same time, so-called Hype investment products stood out as a rare bright spot, recording inflows of $15.5 million. These products have benefited from a surge in on-chain activity involving tokenized precious metals, which appear to be gaining traction as an alternative store of value amid stress in the cryptocurrency market.
Taken together, the latest flow data indicates that the market is in defensive mode. With capital continuing to flow out of core assets and only niche sectors attracting inflows, investor behavior suggests that caution is firmly in check.
The stability of sentiment is expected to depend on major U.S. economic events this week, a slowdown in large-scale selling, and a reduction in geopolitical risks. These factors remain uncertain in the near term.