Crypto investment products see largest outflows on record amid SVB collapse

Cryptocurrency investment products lost 10% of assets under management last week as institutional investors rushed out during the latest bout of market volatility sparked by the collapses of Silvergate and Silicon Valley Bank.

Digital asset investment products saw $255 million in outflows during the week ending March 12, marking the fifth straight weekly drop and the biggest drop on record in seven days, according to CoinShares. The 10% drop in assets under management, or AUM, retraced all gains in 2023.

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

Year-to-date flows are now negative for Bitcoin, Ether, and multi-asset funds. Although Bitcoin short products posted minor outflows last week, these assets have seen total inflows of $49 million this year.

Investors were on edge last week after Silvergate Bank, a crypto-friendly financial institution, announced that it unwind their operations and liquidate all remaining assets. Earlier this month, Silvergate announced that delay in submitting the necessary documentation with the United States Securities and Exchange Commission, raising widespread fears about his financial position. Like other companies, Silvergate's problems stemmed from its involvement with the now-failed FTX cryptocurrency exchange.

Related: Crypto Biz: Silvergate Shuts Down, Alameda Sues Grayscale

Added to the chaos of last week was the sudden Silicon Valley bank closing (SVB), a financial institution with deep ties to cryptocurrency-focused venture capital funds. Although the bank was allowed to fail, the Federal Reserve, US Treasury and Federal Deposit Insurance Corporation confirmed over the weekend that they would guarantee all SVB deposits.

The resolution of the SVB collapse appears to have bolstered confidence in the cryptocurrency sector, leading to a broad rally in the market for Bitcoin and other crypto assets. Bitcoin price hit $24,639 on March 13 after dipping below $20,000 last week, according to data from Cointelegraph Pro Markets.