According to a December 23 report by CoinShares, the sharp decline aligns with economic uncertainties and market reactions to shifting monetary policies.

Source: CoinShares

A significant chunk of this decrease occurred between December 19 and 20, when more than $1 billion exited digital asset funds. CoinShares attribute this to cooling enthusiasm following the Federal Reserve’s December 18 decision to ease the federal funds rate by 25 basis points, lowering it to a 4.25%-4.50% range, the lowest level since February 2023. Despite the cut, projections signaled a slower pace for additional reductions, dampening investor sentiment.

Outflows were concentrated in foreign markets. Germany, Sweden, and Switzerland collectively saw $212 million withdrawn, while Canada’s markets recorded $60 million in losses during the same week. Multi-asset products were also hit hard, with $121.4 million in outflows.

U.S. Market Leads with $567M Inflows

Contrasting the losses, the U.S. market pulled in $567 million in inflows, leading a few regions that defied the broader trend. Brazil and Australia followed suit, bringing in $16 million and $10 million, respectively. The uneven performance highlights regional differences in investor confidence and strategies during the downturn.

Source: CoinShares

Bitcoin emerged as the top performer among digital assets, attracting $375 million in inflows despite intra-week fluctuations. Ether also saw positive movement, with $51 million entering its funds. Solana struggled, experiencing $8.7 million in outflows, further amplifying its challenging year.

CoinShares noted, “Bitcoin, despite the intra-week outflows, still saw net inflows for the week totaling US$375m, with little activity from short-bitcoin investors.” This trend underscores Bitcoin’s resilience, even as its price dropped from $106,000 on December 16 to $93,370 by December 20—a decline of 10.5%. Year-to-date, the cryptocurrency still boasts an impressive 115% gain.

ETF Industry’s Explosive Growth

Amid the turbulence in crypto markets, the exchange-traded fund (ETF) industry is celebrating a record-breaking year. Bank of America reported $1.6 trillion in ETF inflows in 2024, bringing the global market to an astonishing $15.1 trillion in assets under management, according to Benzinga.

The ETF landscape is evolving rapidly, with 2024 marking an all-time high of 1,485 new fund launches. This surge reflects growing investor demand for liquidity, cost efficiency, and tax advantages. Institutional investors and retail traders alike are leaning heavily on ETFs as the cornerstone of modern portfolios.

Active ETFs are gaining traction, now representing 18% of total inflows. Though passive strategies still dominate, comprising over half of equity fund assets, the rise of active management indicates a shift in investor priorities. Mutual fund-to-ETF conversions are accelerating, driven by the need for more efficient and innovative investment vehicles.

The contrasting fortunes of crypto ETPs and traditional ETFs underscore how different sectors are responding to evolving market dynamics. While digital assets grapple with volatility and shifting monetary policy expectations, ETFs continue to solidify their position as a go-to investment choice.