The enormous decline in ETF assets has resulted from the declining price of Bitcoin and other cryptocurrencies, rather than from small withdrawals.
According to Straus statistics, crypto ETFs witnessed C$51 million in withdrawals from the start of this year to Nov. 18, with C$20 million of that coming in the first 18 days of this month.
One of the biggest reasons behind these withdrawals was the decline in the price of Bitcoin and Ether following the news of FTXs bankruptcy.
Investors Were Quickly to Put Money In
After authorities permitted the development of products that track ETH, BTC, and altcoins, Investors in Canada were quick to rush to invest in cryptocurrency exchange-traded funds. But they’ve lost the majority of it in a year.
Currently traded ETFs had just C$1.64 billion ($1.22 billion) in assets that are currently being managed.
An analysis carried out by the financial analyst of ‘The National Bank of Canada’ Daniel Straus, shows a drop of more than three-quarters from their C$7.3 billion worth.
The failure of Sam Bankman-FTX, Fried’s, and other bankruptcies in the sector have contributed a crippling blow to investor confidence in the digital assets class.
As the cryptocurrency market decline worsens other major market players have also indicated that they can soon face bankruptcy issues.
Genesis Global and some other US cryptocurrency brokers have already announced that they are looking for funds on a priority basis to keep floating above the bankruptcy threats.
BlockFi Inc. is another major crypto player that seems desperate to seek financial help.
Experts Believe That Market Has Swiftly Changed for Risk Assets
To measure how seamlessly the risk asset market has changed, a single money-market exchange traded fund managed by CI Financial Corp. currently has more assets compared to all the crypto ETFs registered in Canada combined.
The CI fund employs the basic investing approach possible: it deposits funds in commercial banks’ interest-paying savings accounts.
The decline in the prices of Bitcoin, Ether, and other digital currencies has contributed largely to the decline of ETF assets as compared to recent outflows.
Canada’s Push Towards Crypto Regulations
Canada has gone further than the United States in regulating crypto-related products.
For tax reasons, cryptocurrencies are categorized as commodities, whereas many coins and tokens are considered securities.
The country opted for intense regulations after Quadriga CX, the country’s largest crypto exchange collapsed back in 2019.
Nonetheless, Canadian crypto exchanges and funds store their assets with US-based custodians such as Gemini and Coinbase.
Hopefully, Canada will urgently look for solutions to tackle its crypto-related woes, following the recent gain in the price of Bitcoin and other cryptocurrencies.