In a clear bullish signal, institutions showed a renewed interest in crypto in 2023 after witnessing the market downturn the previous year, indicating a positive sentiment and confidence in the long-term potential of digital assets.

Digital asset investment products received approximately $2.3 billion of inflows last year, as revealed by a new report from alternative asset manager CoinShares, suggesting a substantial inflow of capital into the crypto market.

A remarkable 87% of these inflows, equivalent to almost $2 billion, were directed towards Bitcoin, underscoring its dominant position and appeal among institutional investors.

Record-Breaking Bitcoin Dominance

Bitcoin’s dominance over the rest of the crypto market reached unprecedented levels in 2023, based on CoinSharesÔÇÖ data spanning back to 2017, further asserting its status as the frontrunner in the digital currency realm.

Comparatively, Bitcoin’s previous dominance peak, in 2020, saw the cryptocurrency receive 80% of all flows, indicating a considerable increase in market share over the past few years. Bitcoin’s value surged by an impressive 155% over the course of 2023.

The surge in Bitcoin’s dominance was largely attributed to the anticipation surrounding the potential launch of Bitcoin spot exchange-traded funds, as suggested by the report.

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The crypto sector witnessed consistent inflows from the week of September 25 until the end of the year, with only one week of outflows occurring during that period, indicating sustained investment interest and confidence in the market.

The United States led the way in terms of global inflows, contributing a significant $792 million to the total inflows into crypto assets, highlighting the substantial investment activity within the country.

Impact of Bitcoin ETF

By comparison, Germany, Canada, and Switzerland witnessed inflows of $663 million, $543 million, and $434 million, respectively. Notably, these countries accounted for approximately $3.3 billion in crypto assets under management each, indicating a higher percentage of funds moving into digital assets in these regions than in the US.

ÔÇ£The US lagging is perhaps understandable given the likely preference amongst investors for a spot-based ETF,ÔÇØ CoinShares remarked, highlighting the potential reasons for the varying levels of inflows across different markets.

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Total inflows in 2023 were 2.7 times higher than in 2022, marking the third largest yearly influx on record, indicating a significant surge in investment activity and capital inflows into the crypto market.

Assets under management globally reached $51 billion, the highest level since March 2022, further affirming the growing significance and interest in the cryptocurrency space.

Crypto stocks benefitted from the trend, with $458 million in inflows, propelling assets under management up by 109%, underscoring the growing investment interest and confidence in cryptocurrency-related stocks.

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Rise of Solana and Impact on Ethereum

Bitcoin mining stocks also experienced significant growth, with Bernstein analysts noting that ÔÇ£Bitcoin miners remain high-beta Bitcoin stocks,ÔÇØ indicating the strong correlation between the performance of Bitcoin and related mining stocks.

Solana emerged as another major winner, receiving $167 million in inflows in 2023, further solidifying its position as a prominent digital asset and demonstrating significant investor interest in the platform.

Furthermore, Ethereum, the second largest cryptocurrency by market capitalization, notably only received $78 million in inflows, indicating a sluggish performance compared to other leading cryptocurrencies. CoinShares suggested that investor reluctance toward Ethereum had benefitted Solana.

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Tom Carreras is a markets correspondent at DL News. Got a tip about crypto flows? Reach out at [email protected]