Cryptoverse: Early Birds Are Betting Bitcoin Is Hitting Bottom

June 7 (Reuters) – As crypto winter creeps into June, the first signs of a thaw are appearing.

Some investors are now betting that bitcoin is bottoming out, judging by the money flowing into listed cryptocurrency funds, which represent only a slice of the market but are popular among institutional and retail players.

Overall flows to these funds turned positive last month, with an average weekly inflow of $66.5 million, a reversal from a dismal April when they saw an average weekly outflow of $49.6 million. million, according to data provider CryptoCompare.


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“It’s largely institutional investors and, to some extent, individuals, acknowledging that the pain has already been endured and that we’re closer to the bottom than the top,” said Ben McMillan, chief investment officer. of IDX Digital Assets, based in Arizona. .

“If you get into crypto at these levels, a little short-term volatility could be worth a long-term gain,” he added. “Many institutional investors are beginning to see crypto as a source of longer-term growth potential.”

It’s unclear, however, if the tentative flows will last or if the incipient trend will repeat itself across the broader market.

Many people will also think twice about re-entering the market, having been rocked mightily as the crypto was rocked by concerns over global monetary tightening and rising inflation. Bitcoin has lost about half its value since peaking in November, it’s down a third in 2022 and has been languishing at around $30,000 for a month.

Fund data nonetheless indicates that some investors are returning to crypto, albeit in the perceived safety of exchange-traded products (ETPs) with their promise of greater liquidity and security.

The assets under management of several bitcoin futures ETFs increased last week, according to Kraken Intelligence. Assets in ProShares Bitcoin Strategy ETFs rose 6%, while those in Global X Blockchain & Bitcoin Strategy ETFs (BITS.O) and VanEck Bitcoin Strategy ETF soared more than 3%.

By comparison, ProShares’ bitcoin fund saw outflows of over $127 million in April.

The uptrend extended into June, with global bitcoin ETP holdings hitting an all-time high of 205,008 bitcoins in the first two days of the month, Norwegian crypto research firm Arcane Research found.

“It’s a promising sign for what’s to come,” Arcane analyst Vetle Lunde said.

In one indication, investors are being selective and cautious, with only Bitcoin funds seeing inflows while Ethereum and other crypto-focused funds still saw outflows.

Reuters Charts
Reuters Charts


But let’s not forget that while some funds’ fortunes are potentially turning, most have posted weak returns this year as the crypto market crashed.

U.S. digital asset funds have lost 46% on average so far in 2022, posting losses of 22% in May, according to Morningstar.

All of the listed digital asset investment products tracked by CryptoCompare lost money in May, with the worst performing product being Grayscale’s Digital Large Cap Fund product, which fell 38.5%.

“Bitcoin has been limited in concert with broader market activity lately, investors are looking for a bottom and don’t know where it is,” said Jack McDonald, CEO of PolySign, which specializes in cryptocurrency solutions. custody of digital assets for institutional investors.

Shares of Grayscale Bitcoin Trust (GBTC.PK), one of the largest bitcoin funds with over $19 billion in assets, are trading at a 29% discount to net asset value, around its largest discount since inception and indicating weak demand for the product.

And despite the rally in May, many market watchers expect crypto fund inflows to remain subdued until macroeconomic and regulatory risks become clearer.

“We are waiting for high conviction supply to come back into the markets,” McMillan added at IDX. “There’s still a lot of wood to cut on the macro front.”

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Reporting by Medha Singh and Lisa Pauline Mattackal in Bengaluru Editing by Vidya Ranganathan and Pravin Char

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The opinions expressed are those of the author. They do not reflect the views of Reuters News, which is committed to integrity, independence and freedom from bias by principles of trust.

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Cryptoverse: Early Birds Are Betting Bitcoin Is Hitting Bottom

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