Crypto investing

FTX crisis leads to record inflows into short-investment products

The aftermath of FTX’s collapse has soured crypto investor sentiment with “record” inflows into short-investment products last week, said CoinShares.

Institutional investors have responded to the negative sentiment caused by FTX’s collapse, with record institutional inflows into crypto-focused short-investment products.

According to CoinShares chief strategy officer James Butterfill, 75% of the total inflows by institutional crypto investors for the week ending Nov. 18 were placed in short investment products — essentially a bet that crypto prices will decline.

Butterfill said the takeup of short positions by investors is likely “a direct result of the ongoing fallout from the FTX collapse,” while the total assets under management (AUM) for institutional investors is now at $22 billion — the lowest in two years.

Over the week, $14 million was poured into short-Ether (ETH) investment products. CoinShares said it was “the largest weekly inflow on record.”

CoinShares cited “renewed uncertainty” over Ethereum’s Shanghai upgrade slated for Sep. 2023 and mentioned the sizeable amount of ETH held by the FTX exploiter as possible reasons for the negative sentiment.

Inflows into short investment products for Bitcoin (BTC) hit $18.4 million. Bitcoin short products were reported to have an asset-under-management (AUM) of $173 million coming close to the $186 million high.

Investors are also seemingly dropping altcoins with Solana (SOL), XRP (XRP), BNB (BNB) and Polygon (MATIC) product outflows totaling $6 million.

The newly reported inflows are a slight change from the week prior, which saw the largest inflows in 14 weeks to crypto products totaling $42 million, although short Bitcoin products already started to see inflows of $12.6 million and blockchain equity products recorded the largest weekly outflow since May 2022.

Meanwhile, the ripple effect of investor distrust for centralized exchanges is taking hold in the traditional finance market with Coinbase posting an all-time low share price on Nov. 21.

The crypto exchange’s share price dropped 8.9% on the day, slipping to under $41, according to Google Finance. It has now slightly recovered to around $41.20 at the time of writing but continued to trade at a slight 0.19% negative after hours.

Coinbase’s stock price is down almost 88% since it went public on Apr. 16, 2021.

HK and Singapore’s mega-rich are eyeing crypto investments: KPMG

Despite the ongoing bear market, family offices and high-net-worth individuals in Hong Kong and Singapore are keen to invest in crypto or already have holdings.

Hong Kong and Singapore’s wealthy elite appear to be looking at digital assets with fervor after a new report from KPMG suggesting over 90% of family offices and high-net-worth individuals (HNWI) are interested in investing in the digital assets space or have already done so.

According to an Oct. 24 report from KPMG China and Aspen Digital titled “Investing in Digital Assets,” as much as 58% of family offices and HNWI of respondents in a recent survey are already investing in digital assets, and 34% “plan to do so.”

The survey took the pulse from 30 family offices and HNWIs in Hong Kong and Singapore with most respondents managing assets between $10 million to $500 million.

KPMG said the large crypto uptake among the ultra-wealthy has increased confidence in the sector, spurred by the increase in “mainstream institutional attention.”

It also noted institutions also have more accessibility to digital asset financial products, including regulated products.

Singapore’s largest bank, DBS, announced in Sept that they were expanding crypto services on its digital exchange (DDEx) to approximately 100,000 wealth clients who meet the criteria around their income to be classed as accredited investors, ensuring adherence to the financial authorities’ view that crypto assets are not suitable for retail investors.

Meanwhile, Crypto exchange Coinhako announced in October that they were among a small number of firms to receive a license from the Monetary Authority of Singapore (MAS) to offer Digital Payment Token services.

However, the allocations remain relatively small, with most allocating less than 5% of their portfolio to digital assets — mainly in Bitcoin (BTC), Ether (ETH) and stablecoins.

Respondents cited market volatility and difficulties in accurate valuation and lack of regulatory clarity on digital assets continue to be a hurdle to investment in the sector.

“As digital assets are fairly new, there is still some uncertainty among FOs and HNWIs about investing in the sector, particularly regarding regulation and valuation,” wrote the report’s authors.

However, KMPG noted that regulatory clarity in the two countries could be changing for the better.

“For example, all virtual asset service providers (VASPs) in Hong Kong will have to apply for a license by March 2024. Singapore is also planning to broaden its cryptocurrency regulations.”

Hong Kong securities regulator recently announced it wants to allow retail investors to invest directly in digital assets and to reconsider current crypto trading requirements.

The Monetary Authority of Singapore (MAS) has been expanding crypto trading for accredited investors and several exchanges receiving preliminary approval to provide Digital Payment Token services in the city-state.

Earlier this month, Anchorage Digital co-founder and president Diogo Mónica said his company has chosen Singapore as a “jump point” into the wider Asia market because the country has a strong regulatory environment.

“It’s about being in a regime that’s friendly towards crypto and that businesses want to do business in. We’re institutional only, institutions are going to Singapore, so we’re following suit.”