The rollercoaster ride continues for crypto investment funds as the latest data from CoinShares showing a second straight week of heavy outflows.

Digital asset investment products saw net outflows of $584 million last week, bringing the two-week exodus to a staggering $1.2 billion. The sharp reversal comes after a record-breaking $2 billion inflow in May, highlighting the volatile and sentiment-driven nature of the crypto fund space.

So what's behind the sudden shift in investor sentiment? According to CoinShares, it's all about interest rates. The recent outflows "are in reaction to the pessimism amongst investors for the prospect of interest rate cuts by the Fed this year," the report notes.

The fading hopes for a Fed pivot have taken the wind out of Bitcoin's sails, with the largest cryptocurrency bearing the brunt of the outflows. Bitcoin funds saw $630 million in net outflows last week, accounting for the lion's share of the overall redemptions.

Interestingly, despite the souring sentiment, investors aren't rushing to bet against Bitcoin. Short-bitcoin funds, which profit when the price of BTC falls, actually saw modest outflows of $1.2 million, suggesting that bearish speculators are sitting on the sidelines for now.

Ethereum, the second-largest cryptocurrency, also felt the sting of the risk-off mood, with ETH funds registering $58 million in outflows. However, some altcoins managed to buck the trend, with Solana, Litecoin, and Polygon funds attracting small but notable inflows.

Multi-asset products, which invest in baskets of cryptocurrencies, saw a strong $98 million in inflows, indicating that some investors view the recent altcoin weakness as a buying opportunity.

From a regional perspective, the U.S. led the outflows with $475 million in redemptions, while Canada also saw significant outflows of $109 million. Germany and Hong Kong registered more modest outflows, while Switzerland and Brazil were the lone bright spots, with inflows of $39 million and $48.5 million, respectively.

The latest fund flows data comes amid a broader cooldown in the crypto ETP space. Last week saw the lowest global ETP volumes since the launch of U.S. Bitcoin ETFs in January, with just $6.9 billion traded.

The choppy fund flows and declining volumes suggest that the crypto market is grappling with a crisis of confidence, as investors reassess their expectations for monetary policy and global growth. While the long-term bullish case for Bitcoin and crypto remains intact, the path ahead is likely to be bumpy.

Edited by Stacy Elliott.