US SEC Clampdown Pushes Institutional Investors to Withdraw Over $32M

Following the increasing clampdown by the United States Securities and Exchange Commission (SEC) on several crypto firms, institutional investors have hurriedly withdrawn more than $30 million as per CoinShares report. 

This week in Fund Flows, by our Head of Research @jbutterfill :

Digital assets see US$32m in outflows, but rising prices push AuM to highest since August 2022.

Read the full report – https://t.co/EIXblrOBcL

Get a comprehensive view of last week’s crypto flows 🧵 (1/5) pic.twitter.com/WvJk15WAWs

— CoinShares (@CoinSharesCo) February 20, 2023

Institutional crypto fund manager CoinShares reported that institutional investors are feeling the heat, thereby leading to the largest weekly outflow in 2023. 

It was established that the massive outflow was recorded on digital asset investment products, which saw outflows hitting $32 million last week.

CoinShares likened the development to the US SEC clampdown in Kraken exchange crypto staking program, the ban on Paxos BUSD, among other wars on cryptocurrency. 

As a result, outflows subsequently hit $62 million before it subsided midway through last week due to the spontaneously improved market sentiment. 

It was reported that most of the outflows, especially 78%, were related to Bitcoin investment products while Bitcoin short funds recorded an impressive $3.7 million inflow within the same period. 

According to CoinShares:

“We believe this is due to ETP investors being less optimistic on recent regulatory pressures in the US relative to the broader market.”

Meanwhile, the negative sentiment from institutional investors had little or no effect on the crypto market as it subsequently surged by 10% within the same period. 

CoinShares established that the slight pump pushed total assets under management for institutional products to $30 million. 

In the same vein, Ethereum and other mixed-asset funds also recorded outflows during the period while blockchain equities reported inflows of about $9.6 million for the week.

SEC Clampdown Lingers On

The crypto market will need to grapple with SEC clampdown because it appears there is no end in sight. On Feb 17, US SEC descended on Terraform Labs co-founder, Do Kown, charging him for operating a multi-billion dollar fraudulent crypto scheme. 

In the same vein, USDC stablecoin issuer Circle was also in the news for rumours that the U.S. SEC is planning to ban USDC, but the claim was later rebuffed. 

Given the recent prevalence, crypto firms should live up to expectations by adhering to standard rules and regulations in the overall interest of the crypto industry.