Institutional digital asset products and crypto exchanges record massive plunge in trading volume

• Institutional cryptocurrency investment products have witnessed the quietest trading week since Q4 2020.
• Investors are looking to diversify their cryptocurrency holdings as multi-asset products gain popularity.
• Crypto exchanges record a plunge in trading volume as asset prices fail to galvanize investors’ enthusiasm. 

The second half of 2021 has kicked off with a quiet start as cryptocurrency investment products witnessed minor outflows last week.

Institutional investors look to diversify their holdings

Digital asset investment products have seen the slowest trading week since October 2020. Cryptocurrency investment products have seen $4 million in outflows last week, according to a CoinShares report.

The report further noted that multi-asset products had been the most popular last week, with inflows totaling $1.2 million as institutional investors are looking to reduce their risks.  

Although the inflows to multi-asset funds may seem relatively small compared to Bitcoin and Ethereum, investors are now looking to diversify their cryptocurrency holdings. Inflows to multi-asset products have reached a total of $362 million year-to-date. 

Bitcoin-related investment products have seen minor outflows of $7 million last week, while Ethereum has seen diminished inflows of $800,000. 

Sentiment has been divided in the market as North American Bitcoin product providers have been witnessing consistent outflows, while European funds have been responsible for the rise in outflows. 

Institutional investors appear to be vigilant in the cryptocurrency market, as inflows continue to be stalling after weeks of profit-taking. 

Trading volumes have also subsided, as investment products have totaled $1.58 billion, marking a new low since October of last year, according to CoinShares.

Crypto trading volume drops following Bitcoin price crash

Trading volume at cryptocurrency exchanges fell by over 40% last month, according to CryptoCompare. 

Bitcoin price reached a monthly low at $28,908 in June, which led to trading volumes at leading digital asset exchanges including Binance, Coinbase and Kraken to see a massive plunge. 

Behind the crypto market crash was the fear brought on by the Chinese crackdown on the new asset class. In June, the Chinese government took a step further to ban digital assets and instructed multiple provinces in the country to shut down mining operations. Bitcoin miners were left with no choice but to either sell rigs and cease operations or move elsewhere. 

According to CryptoCompare’s report, lower prices of crypto assets and lower volatility were the reasons behind the drop in trading volume. 

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