(Kitco News) – Investors opted to wait on the sidelines in the lead-up to Friday’s Bitcoin (BTC) halving rather than increase their exposure to cryptocurrencies, as the latest digital asset fund flows report from CoinShares shows that crypto funds recorded $206 million in outflows last week while ETP trading volumes declined to $18 billion.
“These volumes represent a lower percentage of total Bitcoin volumes (which continue to rise) at 28%, compared to 55% a month ago,” said James Butterfill, head of research at CoinShares. “The data suggests appetite from ETP/ETF investors continues to wane, likely off the back of expectations that the Fed is likely to keep interest rates at these high levels for longer than expected.”
The United States continued to dominate the flows from a regional perspective, with $244 million flowing out of the incumbent ETFs the week ending April 19, “while newly issued ETFs continued to see inflows, but noticeably lower than prior weeks,” Butterfill said.
Germany and Sweden also recorded outflows of $8.3 million and $6.7 million, respectively. Canada led all regions with inflows of $29.9 million, while Switzerland saw $7.8 million in inflows, Brazil gained $5.5 million, and Australia-listed products increased by $2.2 million.
“Bitcoin saw US$192m outflows, but few investors saw this as an opportunity to short, with short-bitcoin seeing US$0.3m outflows,” Butterfill said. “Ethereum (ETH) saw US$34m outflows, marking its 6th consecutive week.”
Multi-asset funds benefited from improved sentiment to record $8.6 million in inflows, while Litecoin (LTC) and Chainlink (LINK) saw inflows of $3.2 million and $1.7 million, respectively.
“Blockchain equities saw its 11th consecutive week of outflows totaling US$9m as investors continue to worry over the consequences of the halving on mining companies,” the report concluded.
In a separate report from CoinShares that provided an in-depth analysis of the crypto mining industry post-halving, analysts said that many miners could switch to serving the artificial intelligence industry, which has become more profitable in recent years.
“We expect a shift towards AI in energy-secure locations due to its potential for higher revenues, with companies like BitDigital, Hive and Hut 8 already generating income from AI,” they said. “This trend suggests that Bitcoin mining may increasingly move to stranded energy sites while investment in AI grows at more stable locations. TeraWulf, BitDigital and Core Scientific all have current AI operations or AI growth plans.”
They predicted that the hash rate of the Bitcoin network would fall by 10% after the halving as miners turn off unprofitable ASICs, but said they expect the hash rate to rise to 700 exahash (EH/s) by 2025.
At the time of writing, the Bitcoin hash rate stands at 596.22 EH/s, according to data provided by CoinWarz. The all-time high hash rate of 749.185 EH/s was hit on March 24.
“Substantial cost increases are expected due to the halving, with electricity and overall production costs nearly doubling,” the report said. “Key mitigation strategies include optimizing energy costs, increasing mining efficiency, and securing favorable hardware procurement terms. Miners are actively managing financial liabilities, with some using excess cash to reduce debt significantly.”
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