Cryptocurrency Corner: February 2022

The performance of the largest cryptocurrencies and current events in the space.

ETF Report takes the pulse of the cryptocurrency space, including the performance of leading cryptocurrencies and the top related news items.

Altcoins Lead Fund Flows

by James Butterfill, CoinShares

Digital asset investment products saw inflows totaling $85 million during the week ended Feb. 4, 2022, marking the third week of inflows totaling $133 million, suggesting continued positive sentiment among investors. Assets under management (AUM) now total $52.4 billion, with Jan. 24 marking the low point in the most recent run of negative sentiment. While Europe has seen inflows (US$10.3 million), the majority has been from the Americas, particularly Brazil and Canada (US$75 million).

Bitcoin continues to lead the inflows, with $71 million in the week ending Feb. 4, the largest since early December, with this three-week run of inflows totaling $108 million. Volumes in bitcoin investment products remained low in the week ending Feb. 4, at $1.8 billion versus $3.4 billion the previous week.

Investment products flows for Ethereum suggest investors remain bearish, with outflows of $8.5 million, having entered the ninth-week run of outflows totaling $280 million, representing 2.2% of AUM.

A broad set of altcoins also saw inflows, such as Solana, Polkadot and Cardano, which saw inflows totaling $2.4 million, $2.2 million and $1.1 million, respectively. Terra also saw its first significant inflows, totaling $1.4 million last week, representing 26% of AUM.

Grayscale Debuts Crypto Ecosystem ETF

by Heather Bell

Grayscale Investments entered the ETF space in early February with the launch of the Grayscale Future of Finance ETF (GFOF). The new fund invests in foreign and domestic financial companies that support the digital assets and cryptocurrency industries.

It comes with an expense ratio of 0.70% and lists on the NYSE Arca.

GFOF tracks a Bloomberg index that targets companies that are in the cryptocurrency and digital asset ecosystem and fall into three categories. The financial foundations category includes companies that facilitate transactions involving digital assets, while the technology solutions category covers companies that support the creation of applications that implement blockchain technology. The digital asset infrastructure category focuses on companies that provide infrastructure products and services to the digital assets industry, according to the prospectus.

Bloomberg’s methodology uses public information to score companies in three categories: revenue exposure to the theme, relevance to the theme and regulatory risk. Companies with mid-range to high scores in each of the three categories are included in the index, the prospectus says.

SEC Rejects Fidelity Bitcoin ETF Bid

by Dan Mika

The Securities and Exchange Commission denied Fidelity’s attempt to launch a spot bitcoin ETF in the U.S. as January came to a close.

The regulator used the same reasoning in its denial of the fund dubbed the Wise Origin Bitcoin Trust earlier in the month as it did for every recent decision, primarily that Cboe Global Markets had not entered into a surveillance-sharing agreement or other fraud prevention measures.

The rejection came a week after the SEC rejected a joint bid from First Trust and Anthony Scaramucci’s SkyBridge Capital.

Bitcoin ETF proponents have often argued that a surveillance-sharing agreement isn’t necessary because the growth of the CME bitcoin futures market and robust liquidity in the spot markets would act as a buffer against price manipulation, an argument the SEC has repeatedly rejected.

The SEC has denied every request to launch a spot bitcoin ETF since the Winklevoss twins made the first application for such a product in 2013. It has also denied efforts to launch ethereum-based ETFs, along with leveraged or inverse funds tracking bitcoin futures.