📉 Crypto Funds Bleed Again—But the Panic Is Fading: Is This the Start of a Market Reset?

The crypto market may still be nursing wounds from early-year turbulence, but the latest data suggests the selloff is losing momentum—and investors are beginning to reposition rather than retreat.

Digital asset investment products recorded $173 million in net outflows last week, marking the fourth straight week of withdrawals, according to new data from CoinShares.
Yet compared with the heavy redemptions seen just weeks ago, the pace of selling has slowed dramatically, hinting that the market’s most aggressive liquidation phase could be nearing its end.

Over the past four weeks, crypto funds have shed a massive $3.74 billion, reflecting the lingering caution that followed January’s volatility shock.

But the trend line tells a more nuanced story:

This sharp deceleration suggests investors are no longer rushing for the exits. Instead, many appear to be pausing to reassess macro conditions, valuations, and portfolio exposure.

Trading behavior reinforces that shift. Exchange-traded product (ETP) volumes plunged to $27 billion, a steep fall from the $63 billion recorded the previous week—evidence of a market stepping back from frantic repositioning.

One of the clearest signals in the latest report is the widening regional divide in sentiment.

This divergence points to differing interpretations of the same landscape:
While U.S. institutions remain wary of macroeconomic uncertainty, others appear to be accumulating at discounted levels, betting on longer-term recovery.

The market’s two largest assets absorbed the bulk of the withdrawals:

Interestingly, even short-Bitcoin strategies—designed to profit from falling prices—saw money leave, totaling $15.4 million in outflows over two weeks.

Historically, declining demand for bearish bets has sometimes aligned with late-stage selloffs, when traders begin closing downside positions as markets search for a bottom.

Despite the overall negative flows, not every corner of crypto is under pressure.

Several altcoins continued to draw inflows:

These gains signal a selective rotation, not a mass departure. Investors appear to be reallocating capital toward assets with stronger narratives, ecosystem growth, or relative momentum while reducing exposure to larger-cap tokens.

Even in a crypto-native market, macroeconomics remains the dominant force.

Sentiment briefly improved late in the week after softer-than-expected U.S. inflation data triggered $105 million in Friday inflows, underscoring how quickly capital responds to shifts in economic outlook.

“Sentiment improved slightly… following weaker-than-expected CPI data,” noted James Butterfill, highlighting the continued sensitivity of digital assets to policy expectations and interest-rate trajectories.

Taken together, the latest numbers paint a picture far less dramatic than headlines might suggest.

Yes, outflows persist.
But their reduced scale, combined with:

…indicates investors are adjusting portfolios rather than abandoning crypto altogether.

After January’s shock, the market now appears to be entering a consolidation phase—one defined by caution, selective conviction, and a search for the next leadership cycle.

Whether this slowdown marks the beginning of recovery or merely an intermission in volatility will depend heavily on macro conditions and investor confidence in the months ahead.

For now, crypto isn’t seeing a stampede out the door.
Instead, it’s witnessing something quieter—but potentially more important:

A transition from panic selling to strategic repositioning.