Return of the crypto bull: 2023 Inflows were 2.7x higher than in 2022

2023 was a year of recovery for the crypto market following the events of 2022 – including the collapses of Terra/Luna and FTX – and last year served as a launching point for the next bull market cycle as more than $2.25 billion flowed into digital asset investment products throughout the year. 

The $2.25 billion in inflows marked the third-largest year based on data going back to 2017, according to James Butterfill, head of research at CoinShares. But the market still has a long way to go to match the excitement that began in 2020 and extended into the bull market of 2021, when $6.6 billion and $10.7 billion, respectively, flowed into digital asset investment products. 

That said, the gains in 2023 were notable as “the inflows were 2.7x the inflows seen in 2022, marking a dramatic turnaround for the asset class,” Butterfill said. “Much of the recovery was in the final quarter where it became increasingly clear that the SEC was warming up to the launch of Bitcoin spot-based ETFs in the United States.”

Weekly crypto asset flows. Source: CoinShares

The total assets under management (AuM) for all products rose 129% in 2023, ending at $51 billion, the highest level since March 2022, just months before the TerraUSD stablecoin would lose its peg to the dollar and plunge the crypto industry into turmoil. 

“Bitcoin (BTC) was by a wide margin the greatest benefactor from improving investor sentiment, with US$1.9bn of inflows, representing 87% of total flows,” Butterfill said. “Its dominance in flows is the largest in history with the prior peak being 2020 where it received 80% of the flows and the lowest being 2017 at just 42%.” 

Flows by asset. Source: CoinShares

“There does not seem to be a discernible trend here, with the most likely cause being hype around and SEC ETF approval,” Butterfill noted. 

After a dearth of inflows through the first nine months of 2023, “Ethereum (ETH) saw a recovery of inflows to end the year at US$78m but remains a laggard relative to the total AuM representing only 0.7%,” he said. “Meanwhile Solana (SOL) benefitted from investor reluctance on Ethereum, seeing inflows totaling US$167m, representing 20% of AuM.”

Short Bitcoin products increased by $60 million, while XRP and Cardano (ADA) recorded inflows of $18 million and $14 million, respectively. 

The U.S. accounted for the bulk of inflows with $792 million, “but this only represented 2% of AuM, while Germany saw the largest inflows at 22% of AuM followed by Canada and Switzerland at 15% and 13% respectively,” Butterfill said. 

Flows by country. Source: CoinShares

He said it makes sense that the US is lagging “given the likely preference amongst investors for a spot-based ETF.”

Blockchain equities also benefited from the year-end surge in interest, seeing inflows of $458 million, 3.6x the inflows recorded in 2022, which raised their AuM by 109%.