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Crypto Fund Manager CoinShares Reports 97% Slump in Income

In a prior statement, CoinShares claimed that it had almost US$30 million in cryptocurrency assets stranded on FTX, which stopped allowing customer withdrawals in November before declaring bankruptcy.

Photo by Viktor Forgacs / Unsplash / Blockhead

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European cryptocurrency asset manager CoinShares reported a 97% slump in its full-year revenue in 2022 and attributed that massive decline to market turmoil and said it lost £26 million (US$31 million) in the collapse of FTX.

CoinShares made these claims on Tuesday.

The crypto market crashed in 2022, widely called the "crypto winter," due to investors selling risky crypto assets driven by rising interest rates and a string of bankruptcy at well-known crypto firms.

According to CoinShares' fourth-quarter earnings report, the company's "total comprehensive income," considering anticipated losses, dropped from £113.4 million in 2021 to £3 million in 2022.

CoinShares chief executive officer Jean-Marie Mognetti said, "The collapses and frauds that plagued the industry in 2022 have brought a newfound sense of caution to the market, with investors now seeking trusted, regulated institutional players."

Regulatory Crackdown Not Helping

The regulatory crackdown in the United States may have given institutional investors the chills, as digital asset investment products experienced the biggest weekly outflow of 2023.

The SEC's allegations against Kraken for its staking services on February 9 are among the regulatory enforcement actions that are to blame for the shift in opinion.

A few days later, it filed a lawsuit against Paxos for creating Binance USD. Last week, it also recommended amendments for cryptocurrency companies acting as custodians.

Fund Outflows on SEC Scrutiny

European cryptocurrency asset manager CoinShares on Sunday, in a tweet, said the greatest outflow of the year, US$32 million, was recorded in the last week for digital asset investment products.

The outflow follows a broad crackdown on the US digital asset market, targeting everything from staking services to stablecoins to crypto custody as the Securities and Exchange Commission (SEC) intensifies what market watchers calls its "war on crypto."

According to CoinShares analyst James Butterfill, outflows peaked at US$62 million midway through last week but decreased as sentiment improved.

A total of US$3.7 million went into Bitcoin short funds, and 78% of those outflows came from investments tied to bitcoin. The institutional crypto fund manager attributed the increasing outflows to the regulatory crackdown.

The general markets, which witnessed a 10% rise for the period, did not reflect the negative mood of institutional investors.

According to Butterfill, the rise in crypto markets increased the firm's total assets under management for institutional products to US$30 million, the highest since August.

But the latest earnings report and the regulatory scrutiny will weigh on the crypto fund manager's business outlook for this year.