The “heavy winter” for cryptocurrencies continues in June, with their prices hovering at low levels, but there have been some early signs that the climate is about to change.
Some investors are now betting that bitcoin has bottomed out, judging by the money that has been directed into listed cryptocurrency funds, which make up only a small percentage of the market but are popular with both institutional and retail investors.
Net capital inflows to cryptocurrency funds
In May there were net capital inflows to the funds these, with an average weekly amount of $66.5 million, as opposed to April when average weekly outflows of $49.6 million were recorded, according to data from CryptoCompare.
“They are mainly institutional and to some extent retail investors who realize that the pain has already been there and we are closer to the bottom than the top,” said IDX Digital Assets’ chief investment officer.
“If you invest in crypto at these levels, a little short-term volatility may be worth a long-term reward. Several institutional investors are starting to see crypto as a source of long-term potential growth,” he added.
However, it is difficult to say whether these inflows will last or whether this early trend will be replicated in the wider market.
The world remains cautious
Many people will also think twice before putting themselves back into the market, having been badly damaged as the cryptos were hit by concerns over global monetary tightening and rising inflation.
Bitcoin has lost almost half its value from its November high and has been hovering near $30,000 for the past month. Today, its price was down nearly 6% at $29,610.
Inflows only in bitcoin funds
Nevertheless, the data from the funds show that some investors are coming back to crypto, albeit in the perceived safety of exchange-traded products (ETPs) which have greater liquidity.
The inflows continued in June, with global bitcoin ETP assets jumping to an all-time high of 205,008 bitcoin in the first two days of the month, according to Arcane Research found. “It’s a promising indication of what’s to come,” said an analyst.
Showing that investors are being selective and cautious, only bitcoin funds had inflows, while funds focused on Ethereum and other crypto continued to record outflows.
One should not, however, forget that most funds have had poor returns this year as the crypto market took a dive. U.S. digital asset funds have posted average losses of 46% since the start of the year and 22% in May alone, according to Morningstar.
All of the digital asset investment products tracked by CryptoCompare lost money in May, with Grayscale’s Digital Large Cap Fund product dropping the most, 38.5%.
Shares of Grayscale Bitcoin Trust , one of the largest bitcoin funds with over $19 billion in assets, are trading at 29% lower than the net asset value.
With information from Reuters