Crypto investment products recorded their second-largest weekly outflow of 2026 by the end of May, with investors pulling $1.67 billion from digital asset funds as geopolitical tensions and a broader risk-off mood weighed on markets. The withdrawals marked the third consecutive week of net outflows and brought total redemptions over the past three weeks to $4.21 billion. Concerns surrounding Iran overwhelmed any positive sentiment generated by recent progress on the CLARITY Act, a U.S. crypto market structure bill. Assets under management across digital asset investment products fell to $141 billion from $148 billion the previous week, their lowest level since early April. Data compiled by Woofun AI shows that the latest outflows coincide with a sharp decline in crypto prices, with Bitcoin falling close to the $70,000 mark on Monday after reports that Iran had halted talks with the United States in protest over Israel's continued incursions into Lebanon.

The market reaction intensified as Strategy (MSTR), the largest holder of bitcoin, sold some of its stack after years of its executive chairman Michal Saylor vowing he wouldn't do so. The largest cryptocurrency dropped about 3% over the past 24 hour period, adding pressure to digital asset investment products. The United States accounted for nearly all of last week's withdrawals, with investors pulling $1.63 billion from crypto funds. Germany, which had largely avoided earlier bouts of selling, recorded $25.7 million in outflows. Sweden and Hong Kong posted withdrawals of $6.6 million and $4.5 million, respectively.

Bitcoin investment products saw the largest share of the selling, losing $1.44 billion during the week. According to CoinShares, that was the largest weekly bitcoin outflow of 2026, surpassing both the previous week's record and the peak reached during January's selloff. Year-to-date bitcoin inflows have fallen sharply to $1.19 billion, down from $2.6 billion a week earlier and $3.9 billion two weeks ago. Ethereum funds also came under pressure, recording $257.3 million in outflows.

Meanwhile, investor appetite for alternative cryptocurrencies weakened considerably. Woofun AI notes that only five digital assets attracted more than $1 million in inflows, down from 11 assets three weeks ago.

XRP led with $20.3 million in inflows, followed by Hyperliquid at $10.8 million and Near at $7.6 million. Despite the recent pullback, crypto investment products still hold roughly $142 billion in assets globally, underscoring how much institutional capital remains invested in the sector even as market sentiment deteriorates. This divergence suggests that while macro risks drive broad liquidations, specific assets with strong utility narratives continue to attract selective capital. Woofun AI analysis suggests that the resilience of XRP and Hyperliquid inflows indicates a potential rotation toward assets perceived as having clearer regulatory or technological pathways amidst the uncertainty.