The honeymoon phase for digital assets in 2026 was remarkably short-lived.
After attracting $1.5 billion in inflows in the first two days of the year, the market turned sharply.
Last week, $1.3 billion in investment products was raised in just four days outflowerasing almost all early gains and signaling a sudden shift in sentiment.
By the end of the week, digital asset funds posted net outflows of $454 million, reflecting a rapid reassessment of risk.
According to CoinShares, this shift was mainly driven by declining expectations of a rate cut by the Federal Reserve in March.
Fed expectations reduce risk appetite
The biggest challenge to digital assets currently comes from the US.
At the beginning of 2026, markets expected the Federal Reserve to cut interest rates as early as March.
That optimism has faded after stronger-than-expected economic data showed the services sector held up and the labor market remained tight.
For institutional investors, high interest rates are the most important.
Increased interest rates keep the US dollar strong and bond yields attractive, making safer assets more attractive than riskier assets like crypto.
This explains why just four days of outflows wiped out almost all of January’s early inflows; Capital responds quickly to shifts in Fed expectations.
Moreover, geopolitical tensions may also contribute to the shift, especially the increasing uncertainty surrounding Venezuela and the United States.
Escalating political and economic tension in Venezuela, combined with broader concerns about U.S. foreign policy and regional stability, has added a new layer of risk for global investors.
In such environments, institutions often reduce exposure to volatile assets such as crypto, promoting liquidity and capital preservation until geopolitical clarity improves.
Region-wise flow analysis
That said, the selling pressure has been largely concentrated in the US, and not globally.
According to CoinShares data, the United States saw $569 million in outflows last week, making it the only region with negative flows.
Germany recorded $58.9 million in inflows, Switzerland $21 million and Canada $24.5 million.
This split suggests that investors are responding specifically to US monetary policy rather than broader geopolitical concerns.
Bitcoin weakens and atcoins strengthen
While the total outflow was $454 million, the details show a selective move rather than a complete exit from crypto.
BTC lost $405 million as investors reduced their exposure rather than betting on a major price crash. ETH followed by an outflow of $116 million.
Meanwhile, XRP led the inflow with $45.8 million, supported by improved regulatory clarity.
SOL attracted $32.8 million, continuing its strong institutional appeal. SUI earned $7.6 million, which emerged as a new area of interest.
This coincided with Bitcoin [BTC] trade for $92,330, and Ethereum [ETH] was change hands at $3,137.
Meanwhile Solana [SOL] stood for $141, Ripple [XRP] was priced for $2.06, and Sui [SUI] locked in at $1.80, all green candlesticks mark according to CoinMarketCap.
What’s more?
Finally, ETF data also points to renewed confidence.
Bitcoin ETFs included $116.7 million in inflows.
Altcoin ETFs followed suit, including Ethereum ETFs, XRP ETFsAnd Solana ETFswith an inflow of $5.1 million, an inflow of $15.04 million and an inflow of $10.8 million respectively.
This followed a $120 billion drop in the total crypto market value last week.
So if Bitcoin holds above $92,000 and breaks through $94,000, the market could regain strength in February.
Final thoughts
- The speed of the turnaround underlines how fragile optimism was at the start of the year, especially in an interest rate-sensitive market.
- Bitcoin absorbed most of the pressure, but investors reduced their exposure rather than betting on deep downside.