Crypto investment products see largest outflows on record amid SVB collapse

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Last week, cryptocurrency investment products lost 10% of their assets under management as institutional investors rushed to exit during a recent episode of market volatility caused by the failures of Silvergate and Silicon Valley Bank.

According to CoinShares, digital asset investment products recorded an outflow of $255 million in the week ending March 12, marking a fifth straight week of decline and a record seven-day decline. The 10% decrease in assets under management (AUM) reflects all increases in 2023.

As the largest and most influential crypto asset, Bitcoin (BTC) witnessed a $244 million drawdown. Ether (ETH) products lost $11 million in AUM while multi-asset funds gained $2.2 million.

Year-to-date flows for Bitcoin, Ethereum and multi-asset funds are currently negative. Short his bitcoin products recorded a small outflow last week, but these assets combined he recorded an inflow of $49 million this year.

Investors were nervous last week after crypto-friendly financial institution Silvergate Bank announced it would scale back operations and liquidate all remaining assets. Earlier this month, Silvergate announced it would delay filing required documents with the U.S. Securities and Exchange Commission, sparking widespread concerns about its financial situation. Like other companies, Silvergate’s troubles stemmed from its involvement with the now-defunct cryptocurrency exchange FTX.

Related: Crypto Biz: Silvergate Shutdown, Alameda Sues Grayscale

Adding to the turmoil last week was the abrupt closure of Silicon Valley Bank (SVB), a financial institution with deep ties to crypto-focused venture capital funds. Banks were allowed to go bankrupt, but the Federal Reserve, the U.S. Treasury, and the Federal Deposit Insurance Corporation confirmed to insure all his SVB deposits over the weekend.

The solution to the SVB collapse appears to have strengthened confidence in the cryptocurrency sector, leading to a broad market rally in Bitcoin and other cryptocurrencies. Bitcoin price climbed to $24,639 on March 13 after dipping below $20,000 last week, according to data from Cointelegraph Markets Pro.