Inflows into Crypto Investment Products Hit Highest since FTX Collapse

The average weekly inflows into digital asset-based investment products reached $36.8 million in January, which is the highest since the collapse of the once-leading crypto exchange, FTX, in November last year. The new height comes months after FTX’s bankruptcy led to a crypto withdrawal frenzy.

CryptoCompare, a UK-based crypto market data provider, disclosed these numbers on Wednesday in its Digital Asset Management Review for January 2023. According to the data provider, the total assets under management (AUM) of digital asset investment products also improved by 36.8% month-over-month in January, reaching $19.7 billion. The firm noted the figure is the highest AUM on record since May 2022.

“The bullish sentiment was driven by liquidated short positions and a favorable macro environment, reflected in the most recent CPI announcement, which saw Bitcoin's price reach $23,000; its highest level since August 2022,” CryptoCompare explained.

However, despite the improvement, the AUM still falls “considerably” short of total assets under management posted in January last year. This comes as a result of the downtrend experienced in the crypto and traditional asset markets in 2022.

“In January 2023, average daily aggregate product volumes across all digital asset investment products saw a decent recovery, rising 30.0% to $72.5mn. Despite this, volumes are still 84.4% lower compared to January 2022 and 95.2% lower than the all-time high recorded in January 2021,” CryptoCompare explained.

Watch the recent FMLS22 session on the crypto market structure.

Grayscale Okay Despite Troubles at Genesis

According to data shared by CryptoCompare, Grayscale’s Bitcoin Trust (GBTC) continued to top the Bitcoin trust market in January as its assets under management increased by 38.4% to $14.5 billion month-over-month. GBTC is managed by Grayscale Investment, a digital asset manager and a subsidiary company of the Digital Currency Group (DCG).

Grayscale Investments’ bitcoin trust remains strong “despite the uncertainty surrounding Genesis Trading," CryptoCompare said. In mid-November, the crypto lender Genesis Global Capital, which is owned by DCG, faced a 'liquidity crunch' and sought a $1 billion emergency loan. However, over two weeks ago two lending subsidiaries of the firm filed for bankruptcy protection before a Manhattan court.

In addition, the crypto exchange Gemini is battling with Genesis over the payment of a $900 million debt under the Gemini Earn programme. Moreover, three Gemini Earn customers recently filed a class action arbitration request against Genesis for allegedly failing to return Gemini Earn users’ assets. Compounding the situation, the US Securities and Exchange Commission recently charged both Gemini and Genesis for allegedly selling unregistered securities.

“Despite the growth in assets under management and trading volume, the discount associated with Grayscale’s GBTC Trust has only slightly narrowed. The situation remains delicate, as Grayscale faced challenges with the bankruptcy announcement of its sister company Genesis due to exposure to FTX in January, and the ongoing lawsuit against the SEC to convert its Bitcoin Trust into an ETF,” CryptoCompare explained.