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Crypto Fund Investors Brace for More Losses After FTX Setback

Investors are betting that the collapse of Sam Bankman-Fried's crypto empire will further ravage one of this year's worst-performing asset classes.

November 22, 2022
3 minutes
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Investors are betting that the collapse of Sam Bankman-Fried's crypto empire will further ravage one of this year's worst-performing asset classes.

Short-Ether and Bitcoin exchange-traded products (ETPs) have been the dominant force behind inflows into crypto ETPs in the past week, according to data compiled by Bloomberg. At the same time, the total assets under management for digital-asset ETPs have dropped to just under $22 billion, a two-year low.

The recent market activity indicates that investors believe the bankruptcy of FTX Group will continue to cause problems for the sector. Crypto brokerage Genesis is warning potential investors that it may also go bankrupt if it fails to raise emergency funding, Bloomberg News reported Monday.

The 21Shares Short Ethereum ETP was the biggest weekly inflow among products tracked by Bloomberg at $14.2 million. The ETP has rallied 37% since just before FTX started buckling early this month amid revelations about its relationship with Bankman-Fried’s now-defunct trading house Alameda Research.

According to digital-asset manager CoinShares, investment vehicles wagering on declines accounted for three-quarters of all weekly inflows into crypto ETPs. This suggests that "aggregate sentiment was deeply negative for the asset class, likely being a direct result of the ongoing fallout from the FTX collapse," as James Butterfil, head of research at CoinShares, said in a note published Monday.

The MVIS CryptoCompare Digital Assets 100 Index, which tracks the largest tokens, has tumbled 66% this year. Bitcoin was trading at around $15,700 at 11:30 a.m. in London on Tuesday, while Ether hovered around $1,080.

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