TradFi giants are positioning themselves against the trend! Last week, crypto ETPs raised over $1 billion, and Vanguard has finally capitulated to the Bitcoin ETF.

Against the backdrop of a deep pullback in the crypto assets market, the traditional financial sector presents a stark contrast. Data from asset management company CoinShares shows that global crypto assets investment products (ETP/ETF) recorded a net inflow of $1.07 billion last week, ending a previous streak of $5.7 billion in net outflows over four consecutive weeks. Meanwhile, the world's second-largest asset management giant Vanguard announced a historic policy shift, allowing its more than 50 million brokerage clients to trade compliant ETFs and mutual funds of mainstream crypto assets such as Bitcoin, Ethereum, XRP, and Solana starting this Tuesday. These two signals indicate that although short-term prices are under pressure, the institutional demand for long-term allocation to crypto assets and the acceptance of infrastructure are advancing with an irreversible momentum.

Capital Flow Reversal: Crypto ETPs Attract $1.07 Billion in a Week, Ending the “Bleeding” Cycle

According to the latest fund flow report released by CoinShares, the global crypto investment product market welcomed a long-awaited “warm current” in the last week of November. Related products managed by giants such as BlackRock, Fidelity, and Grayscale recorded a net inflow of $1.07 billion last week. This data marks a significant turnaround in market sentiment, successfully ending a previous streak of four consecutive weeks of net outflows totaling $5.7 billion.

CoinShares research director James Butterfill attributed this rebound to the renewed market expectations for an upcoming interest rate cut in the U.S. Earlier, comments by Federal Reserve official John Williams regarding “monetary policy still being restrictive” were interpreted by the market as a prelude to a policy shift, thus boosting the appeal of risk assets. However, this influx of funds occurred just before the market plummeted on Monday (December 2) due to the potential interest rate hike by the Bank of Japan, failing to reverse the overall net outflow pattern for November—during which global crypto funds saw a cumulative outflow of $3.2 billion.

Despite the impact of the Thanksgiving holiday in the United States, which caused the global crypto ETP weekly trading volume to drop from a record $56 billion the previous week to around $24 billion, the dominance of the U.S. market remains solid. U.S.-based crypto funds attracted a net inflow of $994 million in a single week, accounting for the vast majority of the global total. The Canadian and Swiss markets also recorded net inflows of $97.6 million and $24.6 million, respectively, while Germany was one of the few regions to experience a net outflow of $55.5 million.

Overview of last week's Crypto Assets ETP fund flows and asset performance

Total Net Inflow: 1.07 billion USD

Total Net Outflow in the Early Stage: Outflow of 5.7 billion dollars for 4 consecutive weeks.

Overall Performance in November: Net outflow of 3.2 billion dollars

Net Inflow in the US Market: 994 million USD

Bitcoin product net inflow: 461 million USD

Ethereum product net inflow: 308 million USD

XRP Product Net Inflow: A record $289 million (inflows for 6 consecutive weeks, accounting for 29% of total assets under management)

Net outflow of short Bitcoin products: $1.9 million (indicating short covering)

Vanguard's “Century Compromise”: Why Open the Door to Crypto Assets Now?

If the flow of funds data reflects short-term emotional fluctuations, then Vanguard's policy shift is a milestone event with long-term strategic significance. This asset management giant, which manages approximately $11 trillion in assets and is known for its “long-termism” and “prudent” approach, has officially announced the end of its years-long cryptocurrency resistance policy. Starting from December 3 (Tuesday), its platform will allow trading of compliant ETFs and mutual funds primarily holding Bitcoin, Ethereum, XRP, and Solana.

This decision can be described as a “century compromise.” Vanguard has long defined crypto assets as an asset class that is “too volatile and speculative,” believing they are unsuitable for serious long-term portfolios. Even after the approval of the U.S. spot Bitcoin ETF at the beginning of 2024, which set a historic record for inflows, Vanguard still insisted on prohibiting clients from buying, a move that sparked huge controversy. However, the ongoing demand from retail and institutional clients, along with the harsh reality of competitors like BlackRock's IBIT products skyrocketing to nearly $100 billion in scale in just two years, ultimately forced Vanguard to reassess its position.

Andrew Kadjeski, the head of brokerage and investment business at Vanguard, provided a representative explanation in a statement: “Crypto Assets ETFs and mutual funds have withstood the test of market volatility, operating as designed and maintaining liquidity. The management processes serving these funds have matured; investor preferences are also continuously evolving.” This indicates that the driving force behind this shift is not an optimistic view of the short-term price movements of coins, but rather an acknowledgment of the robustness of the structures of related financial products, the maturity of operations, and the undeniable demand from clients.

Leadership Change and Strategic Competition: The Crypto Cold War between Vanguard and BlackRock

One of the key driving forces behind Vanguard's “glamorous transformation” is the change in the company's top leadership. In July 2024, Salim Ramji, the former head of iShares and index investing at BlackRock, will succeed Tim Buckley as the new CEO of Vanguard. This marks the first time in Vanguard's history that a top leader has been hired from outside the company, and Ramji is a public supporter of Bitcoin and blockchain technology, having personally overseen the filing and launch logistics of BlackRock's spot Bitcoin ETF (IBIT).

This personnel change is viewed by industry observers as a decisive signal that Vanguard's crypto policy may be loosening. Ramji's arrival not only brings a different perspective but also symbolizes a new phase in the strategic competition and cooperation between Vanguard and its old rival BlackRock in the crypto space. While BlackRock has reaped substantial rewards in the crypto ETF sector due to its first-mover advantage, Vanguard's long-term resistance has effectively pushed a portion of its clients and potential assets toward its competitor. Now, Vanguard's openness can be seen as a defensive counterattack aimed at addressing product shortcomings and retaining and attracting clients who wish to allocate all mainstream asset classes in one go.

However, Vanguard's “compromise” still bears its distinctive conservative mark. The company has clearly stated that there are no plans to launch proprietary crypto products and will continue to exclude all funds linked to the “memecoins” defined by the SEC. This means that Vanguard positions itself as a neutral “platform” that provides broad access channels, rather than as a direct “product issuer.” This strategy not only responds to market demand but also minimizes the risk of venturing into unfamiliar territories, representing a typical Vanguard-style cautious innovation.

Market Impact Depth Analysis: The “Divergence” Signal of Fund Inflow and Institutional Acceptance

The current market presents a seemingly contradictory yet deeply meaningful picture: on one hand, the price of Bitcoin has significantly pulled back from the October high of $125,000 to below $85,000, with market sentiment low and leverage continuously being cleared; on the other hand, there has been a rebound in net inflows of funds from traditional financial channels, and one of the most resistant giants has finally “surrendered.” This “divergence” between price performance and institutional behavior is worth our in-depth interpretation.

First of all, the capital inflow structure from last week conveyed important information. Bitcoin-related products led with a net inflow of $461 million, while products shorting Bitcoin saw a net outflow of $1.9 million, indicating that some investors are closing short positions or reversing bearish expectations. Even more noteworthy is the capital inflow into Ethereum and XRP products, which reached $308 million and a record $289 million, respectively. The continuous capital inflow into XRP products for six weeks has increased its assets under management (AUM) by 29%, which is likely directly related to the anticipation of the launch of the U.S. spot XRP ETF, showing strong market interest in the ETF of other mainstream assets beyond Ethereum.

Secondly, Vanguard's entry occurred during a period of significant market pullback, which instead reinforced the long-term nature of its decision-making. It is not chasing prices, but rather making a strategic choice based on infrastructure maturity during a calm period in the market. This injects a different kind of solid confidence into the entire industry, one that is distinct from the frenzy of a bull market: even if prices decline, the institutional framework and access channels for crypto assets as an asset class are becoming more stable and widespread. From the successful products of BlackRock and Fidelity to Vanguard's full access today, a compliant investment “highway” for crypto assets laid out by traditional financial giants has basically been established.