Institutional investment flows out of ETH and into competing L1 altcoins

Institutional investors have shifted their attention from Ethereum to competing layer-1 blockchains of late, with capital inflows for altcoin investment products increasing last week while Ether (ETH^[1]) products posted outflows for the third week in a row.

Data from CoinShares’ latest Digital Asset Fund Flows report shows^[2] that investors last week (ending on Friday) loaded up on $3.5 million worth of Avalanche (AVAX^[3]), Solana (SOL^[4]), Terra (LUNA^[5]) and Algorand (ALGO^[6]) funds while capital outflows from Ether products totaled $16.9 million.

It marks the third straight week that Ethereum products have seen outflows, bringing the total over that time to $59.3 million, equal to around 35% of the year-to-date outflows of $169 million from the second-largest blockchain.

Notably, investors also favored digital gold last week despite some recent hesitancy, with Bitcoin (BTC^[7]) products fetching $2.6 million worth of inflows.

Over the past 10 weeks, inflows to Ethereum products have reached only $68.5 million in what could signal a bearish trend by institutions towards the major blockchain.

Alternate layer-1 blockchains have been growing in popularity recently, and decentralized application (DApp) usage on Solana in the last seven days has increased, according^[9] to metrics from DappRadar. Usage for the decentralized exchange (DEX) Orca has grown nearly 43% over the week, and automated market maker (AMM) Raydium has seen a 15.5% increase, with volume in its app reaching over $1.5 billion.

While the metrics for Avalanche’s DApp usage haven’t increased over the week, the blockchains’ investments in incentive programs^[10] and millions spent luring developers^[11] to the platform have traders bullish^[12] on the future of AVAX.

Related: Does the future of DeFi still belong to the Ethereum blockchain?^[13]

The AVAX, SOL, LUNA and ALGO inflows were $1.8 million, $800,000, $700,000 and $200,000, respectively, while Bitcoin saw inflows equating to $2.6 million for the first time in two weeks. Analysts noted that month-to-date outflows for the largest crypto remain at $178 million.

Total outflows over the past three weeks have seen $219 million leave the market, with that number cooling last week winding down to just 7.2 million, a stark contrast to the $134 million which left the market in the first week of April.

Despite the recent run of outflows, the analysts note that year-to-date flows remain positive with $389 million coming into crypto assets since the start of the year.