Global Trade Wars, US Inflation Keep Crypto Investment Sidelined as Outflows Persist for Second Week

• Crypto ETFs posted over $560 million in net outflows last week.
• Less than half of spot BTC ETF investors are in it for the long term.
• The SEC is currently reviewing several Altcoin ETF applications.

A roaring period of multi-billion dollar inflows into cryptocurrency investment products has come to an abrupt close as increasing concerns over tariff wars and inflation yield a second week of outflows.

Seemingly, the euphoria spurred by Donald Trump’s appointment as U.S. President has dwindled. That said, altcoins such as Ripple (XRP), Solana (SOL), and others have seen considerable inflows thanks to positivity around Trump’s new administration.

Crypto Investment Flows

According to the latest CoinShares report , crypto investment products recorded a second-consecutive week of outflows totaling $508 million. This follows an 18-week inflow bonanza that drew in over $29 billion.

The report posits that uncertainty following Donald Trump’s tariff war, ongoing inflation, and monetary policy dynamics caused investors to move cautiously. This is evidenced by crypto trading turnover dropping from $22 billion in the second week of February to $13 billion last week.

However, Ripple captured a sturdy $38.3 million of inflows. The crypto investment report notes that XRP products have pulled $819 million since mid-November 2024. This stems largely from growing optimism that the U.S. Securities and Exchange Commission (SEC) will drop its lawsuit against the firm.

Bitcoin Outflows

It would appear that Bitcoin outflows have once again dominated the week’s figures, with BTC investment products shedding $571 million in outflows. Notably, BTC exchange-traded funds (ETFs) accounted for a majority of last week’s crypto investments following their sizeable $559.65 million in net outflows last week.

Seemingly, BTC ETF inflows have stalled despite consistently high trading volumes. However, some research suggests that this may be due to a high percentage of ETF investors leveraging funds in their arbitrage strategies.

As per 10x Research’s head of research, Markus Thielen, 56% of the $38.6 billion (now $39.56 billion) in net inflows captured by BTC ETFs represent short-term arbitrage strategies. Meanwhile, 44% are real long-term investments.

“The buying and selling of Bitcoin ETFs is primarily driven by funding rates (basis rate opportunities), with many investors focusing on short-term arbitrage rather than long-term capital appreciation,” he added.

In addition, Thielen explains that, as opposed to widespread institutional adoption, BTC ETFs are tied to hedge fund strategies in which short BTC futures positions are leveraged to offset ETF purchases. Traders profit from the “carry trade,” which is the difference between the spot BTC and BTC future price.