Presentation of bitcoin can be seen in an illustrative photo taken at La Maison du Bitcoin in Paris, France, June 23, 2017. REUTERS / Benoit Tessier / Photo file
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June 7 (Reuters) – With the entry of crypto winter in June, the first signs of thawing appear.
Some investors are now betting that bitcoin is bottoming out, judging by the money going to the listed cryptocurrency funds, which are only part of the market but are popular with both institutional and retail players.
Total flows in such funds turned positive last month, with an average weekly inflow of $ 66.5 million, a reversal from gloomy April, when they saw an average weekly outflow of $ 49.6 million, according to data provider CryptoCompare.
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“It’s largely institutional and, to some extent, retail investors who realize that the pain is over and we’re closer to the bottom than the top,” said Ben Macmillan, chief investment officer of Arizona-based IDX Digital. Assets.
“If you enter crypto at these levels, low short-term volatility can be worth paying off in the long run,” he added. “Many institutional investors are beginning to see crypto as a source of long-term growth potential.”
It is difficult to know whether the test streams will continue or whether the emerging trend will be replicated in the wider market.
Many people will also think twice before re-entering the market, as they have been severely shattered as cryptocurrency has been hit by worries about global cash tightening and rising inflation. Bitcoin lost about half of its value from its peak in November, falling by a third in 2022 and fading to about $ 30,000 a month.
However, data from the funds show that some investors are returning to crypto, albeit to the perceived security of exchange-traded products (ETP) with their promise of greater liquidity and security.
According to Kraken Intelligence, assets under the management of several bitcoin futures ETFs have increased in the last week. The assets of the ProShares Bitcoin Strategy ETF increased by 6%, while those of the Global X Blockchain & Bitcoin Strategy ETF (BITS.O) and VanEck Bitcoin Strategy ETF rose by over 3%.
By comparison, ProShares’ bitcoin fund posted outflows of more than $ 127 million in April.
The uptrend widened in June, with global bitcoin ETP holdings jumping to a record 205,008 bitcoins in the first two days of the month, according to Norwegian-based cryptocurrency firm Arcane Research.
“This is a promising sign of what lies ahead,” said Arcane analyst Vetle Lunde.
As an indication that investors are selective and prudent, only bitcoin funds have received flows, while funds focused on ethereum and other cryptocurrencies are still leaking.
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STILL IN THE RED
But let’s not forget that while some funds may potentially rise, most have shown poor returns this year as the crypto market crashes.
US digital asset funds have lost an average of 46% so far in 2022, down 22% in May, according to Morningstar.
All of the listed digital asset investment products tracked by CryptoCompare lost money in May, with Grayscale’s Digital Large Cap Fund performing worst with a 38.5% drop.
“Bitcoin’s reach is limited in line with recent market activity, investors are looking for a bottom and aren’t sure where it is,” said Jack MacDonald, CEO of PolySign, which specializes in digital asset storage solutions for institutional investors.
Shares of Grayscale Bitcoin Trust (GBTC.PK), one of the largest bitcoin funds with assets of more than $ 19 billion, are trading at a 29% discount on net asset value, around the steepest discount since the beginning and is indicative of a low product search.
And despite growth in May, many market observers expect cryptocurrency inflows to remain weak until macroeconomic and regulatory risks become clearer.
“We are awaiting an offer with high conviction to return to the markets,” added Macmillan of IDX. “There’s still a lot of wood to cut on the macro front.”
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Report by Medha Singh and Lisa Pauline Mattackal in Bengaluru Edited 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, according to the principles of trust, is committed to integrity, independence and freedom from bias.
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