Digital asset investment products posted a $414 million net outflow last week, marking the first outflow in five weeks and pushing total assets under management down to $129 billion, their lowest level since early February, according to LookOnChain data. This reversal ended a four-week run of inflows that had begun in mid-March. The latest data represent a sharp cooling from mid-March, when CoinShares reported $1.06 billion of inflows in a third straight positive week for crypto exchange-traded products. The pullback coincided with price action weakening near the $70,500 support level, with Bitcoin falling for three straight days after reaching a six-week high.
The outflow pressure was almost entirely concentrated in the United States, which saw $454 million in outflows, while investors in Germany and Canada provided support with inflows of $21.2 million and $15.9 million respectively. As reported by LookOnChain, this pattern reflects differing regional risk appetite amid macroeconomic pressures. The United States had previously been a major source of crypto investment demand, with Hong Kong and Switzerland emerging as new pockets of demand. This suggests a targeted repositioning by a subset of institutional capital, likely reacting to a mix of macroeconomic pressures and specific asset news. Switzerland also saw minor outflows of $4 million for the week, though Germany's $21.2 million in inflows and Canada's $15.9 million in net inflows helped offset some of the negative sentiment.
According to CoinShares data, the reversal was driven largely by macro factors, with rising inflation expectations and shifting FOMC rate-cut bets that now imply a potential hike as soon as June rather than the cuts markets had priced in earlier this year. This shift in Federal Reserve policy expectations has weighed on broader crypto sentiment, with investors reassessing their positioning in digital assets amid changing monetary policy expectations. A "hawkish pause" interpretation of the recent FOMC meeting appears to have dampened sentiment, slowing weekly inflows to $230 million. The immediate trigger was a sharp shift in Federal Reserve expectations for the June FOMC meeting, with expectations moving from potential rate cuts to rate hikes driven by inflation fears. Geopolitical tensions in the Middle East, particularly the prolonged U.S.-Iran conflict, are key inflation drivers that limit the Fed's room to cut rates, creating sustained headwinds for crypto prices.
Ethereum experienced the largest single-asset sell-off in its history, with $222 million in outflows last week alone, pushing its year-to-date net flow to a negative $273 million, the worst performance among all tracked digital assets. James Butterfill, Head of Research at CoinShares, pointed to the Clarity Act as a likely driver, with the legislation introducing fresh regulatory uncertainty around Ethereum's classification. That uncertainty translated into visible selling pressure across Ethereum-focused funds, with investor sentiment around the asset turning cautious. By contrast, Bitcoin posted a net outflow of $194 million but maintained a strong year-to-date net inflow position of $964 million, showing resilience despite the recent pullback. XRP bucked the trend with a record inflow of $15.8 million, highlighting continued niche interest in alternative digital assets.
Despite the recent outflows, market sentiment showed signs of recovery as the total crypto market cap reached $2.34 trillion at press time, indicating bullish momentum. However, on-chain metrics suggest continued caution among investors, with Santiment data showing both Bitcoin and Ethereum experiencing drops in active address metrics by the end of March. This suggests reduced network participation compared to the high activity seen in early March. Solana's social volume also declined, indicating fewer people are discussing the altcoin. Despite XRP's winning position with $15.8 million in inflows, its network activity showed a sharp drop in active addresses in late March, suggesting that caution remains even among the few winners in the current market environment.
