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Bitcoin outflow hits weekly record as investors diversify

Updated: Aug 31, 2024
Published: May 19, 2021
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The Bitcoin market has seen a record weekly outflow, as investors diversify their investment into other cryptocurrencies.

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Investors diversify into altcoins

Bitcoin remains the leading cryptocurrency, but it has struggled in recent weeks. Its price dropped below the $40k mark for the first time in months. This was caused by a wide range of market events. As a result, cryptocurrency investors have shifted some of their bitcoins and moved them into altcoins.

In a Reuters report, data obtained from digital currency manager CoinShares showed that investors are diversifying their funds into new cryptocurrencies, especially those developed on the Ethereum network. Outflows for bitcoin products and funds totaled $98 million, or 0.2% of total assets under management. For the year, total bitcoin inflows amounted to $4.3 billion. In 2020, investors pumped $15.6 billion into bitcoin products and funds, while ethereum inflows reached nearly $2.5 billion," the report added.

Data obtained from CryptoQuant showed that Bitcoin's total outflow has increased and the cryptocurrency's price has decreased. The leading cryptocurrency's price has dropped from its all-time high of $65,000 in April and is currently trading below the $40,000 mark.

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Data obtained from CryptoQuant

Matt Weller, global head of market research at Forex.com, told Reuters that "While it only represented 0.2% of AUM, last week's largest-ever outflows from bitcoin investment products is noteworthy. Bitcoin's perceived environmental costs are becoming a bigger and bigger part of the narrative, boosting the relative appeal of ethereum and its upcoming transition to the less energy-intense proof-of-stake security model."

Altcoins benefit from Bitcoin's outflow

Bitcoin's loss is altcoin's gain. The leading altcoins have gained massive capital in recent weeks, despite the market being in a bearish trend. Ether, the second-largest cryptocurrency by market cap, gained the most ground after posting a solid inflow of $26.5 million last week. This brings its total to $910 million so far this year.

Ethereum's increased inflow is due to the rise in decentralized financial (DeFi) platforms over the past few months. DeFi platforms have become popular alternative lending marketplaces within the crypto space. The platforms also offer a wide range of other financial services.

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