Cryptoverse: Early Birds That Bet on Bitcoin Bottom Drop

A representation of bitcoin is seen in an illustrative photo taken at La Maison du Bitcoin in Paris, France, June 23, 2017. REUTERS/Benoit Tessier/File Photo

June 7 (Reuters) – As the crypto winter approaches in June, the first signs of the ice are beginning to melt.

Some investors are now betting that bitcoin has bottomed, based on funds heading to listed cryptocurrency funds, which are only a segment of the market but are popular with institutions and retail businesses alike.

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

“They’re very institutional, and to some extent retail investors, realizing that the pain has already been borne, and we’re closer to the bottom than we are to the top,” said Ben McMillan, chief investment officer at Arizona-based IDX Digital Assets. .

“If you’re getting into cryptocurrencies at these levels, a little bit of near-term volatility might be worth a long-term return,” he added. “A lot of institutional investors are starting to look at cryptocurrencies as a source of long-term growth potential.”

It’s hard to tell if the temporary flows will continue, or if the emerging trend will repeat across the broader market.

Many people will also think twice before piling into the market again, after being hit hard as cryptocurrencies have been hit by fears of global monetary tightening and rising inflation. Bitcoin has lost nearly half of its value since its November peak, fell by a third in 2022 and has been stuck at around $30,000 for a month.

However, data from the funds suggests some investors are returning to crypto, albeit in the perceived security of exchange-traded products (ETPs) with the promise of greater liquidity and security.

Assets under management for several bitcoin futures ETFs have risen in the past week, according to Kraken Intelligence. ProShares Bitcoin Strategy ETF Assets Grow 6%, While Global X Blockchain Assets and Bitcoin Strategy ETF Grow (BITS.O) And the VanEck Bitcoin Strategy ETF jumped more than 3%.

In comparison, ProShares’ Bitcoin fund saw outflows of more than $127 million in April.

The uptrend extended into June, as global Bitcoin ETP holdings jumped to an all-time high of 205,008 Bitcoin in the first two days of the month, Norway-based crypto research firm Arcane Research found.

“This is a promising sign of what’s to come,” said Arkan analyst Vettel Lundy.

In a sign that investors are selective and cautious, only Bitcoin funds have received inflows while funds focused on Ethereum and other cryptocurrencies are still facing outflows.

still in red

But let’s not forget that while the fortunes of some funds may be rising, most have posted poor returns this year as the cryptocurrency market has plummeted.

US digital asset funds have lost an average of 46% so far in 2022, posting a 22% loss in May, according to Morningstar.

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

“Bitcoin has been constrained in concert with broader market activity lately, and investors are looking for a bottom and are not sure where it is,” said Jack MacDonald, CEO of PolySign, which specializes in digital asset custody solutions for institutional investors.

Grayscale Bitcoin Trust Shares (GBTC.PK) One of the largest bitcoin funds with over $19 billion in assets, it is trading at a discount of 29% to NAV, around the biggest discount since inception and indicating lower demand for the product.

Despite the recovery in May, many market watchers expect crypto-money inflows to remain subdued until macroeconomic and regulatory risks become more apparent.

“We are waiting for a highly convinced attempt to get back into the markets,” added IDX’s Macmillan. “There’s still plenty of wood to chop on the big front.”

Additional reporting by Medha Singh and Lisa Pauline Matakal in Bengaluru; Editing by Vidya Ranganathan and Praveen Shar

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