Early Bird bet on Bitcoin bottom line

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

Some investors are now betting that bitcoin has bottomed out, based on funds for exchange-listed cryptocurrency funds, which are just one market segment but are popular with institutions and retailers.

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

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“These are very institutional and to some extent retail investors, realizing that the pain has already been suffered and that we are closer to the bottom than the top,” said Ben McMillan, chief investment officer for Arizona. IDX digital assets. .

“If you enter cryptocurrencies at these levels, a little short-term volatility could be worth the long-term ROI,” he added. “Many institutional investors are beginning to see cryptocurrencies as a source of long-term growth potential.”

It is difficult to say if the temporary flows will continue or if the incipient trend will repeat itself throughout the market.

Many people will also think twice before re-entering the market after a heavy impact, as cryptocurrencies have been hit by fears of global monetary tightening and rising inflation. Bitcoin has lost almost half of its value since its peak in November, fell by a third in 2022 and remained at around $30,000 for a month.

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

According to Kraken Intelligence, the assets under management of several bitcoin ETF futures have increased over the past week. ProShares bitcoin strategy ETF assets rise 6%, while global X Blockchain assets and bitcoin strategy ETF rise (BITS.O) and bitcoin strategy ETF VanEck jumps more than 3% .

For comparison, in April Bitcoin fund ProShares saw outflows of over $127 million.

The uptrend extended into June as global Bitcoin ETP holdings hit a record high of 205,008 Bitcoin in the first two days of the month, Norwegian research firm Arcane Research said.

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

In a sign that investors are selective and cautious, only bitcoin funds have received proceeds, while funds focused on Ethereum and other cryptocurrencies are still facing exits.

Reuters Charts
Reuters Charts

still red

But let’s not forget that while the fortunes of some funds may increase, most have performed poorly this year as the cryptocurrency market plunged sharply.

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

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

“Bitcoin has recently been limited due to broader market activity and investors are looking for the bottom and don’t know where it is,” said Jack MacDonald, CEO of PolySign, which specializes in data storage solutions. digital assets for institutional investors.

Grayscale Bitcoin Trust Shares (GBTC.PK) One of the largest bitcoin funds with assets of over $19 billion, is trading at a 29% discount to net asset value, roughly the biggest discount since its creation and showing lower demand for the product.

Despite the rally in May, many market watchers expect cryptocurrency inflows to remain contained until macro and regulatory risks become more apparent.

“We look forward to a highly-convinced attempt to re-enter the markets,” added IDX’s Macmillan. “There is still a lot of wood to cut on the big front.”

ETFs for cryptocurrencies and blockchain
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Additional coverage by Medha Singh and Lisa Pauline Matakal in Bengaluru; Editing by Vidya Ranganathan and Praveen Shar

Our criteria: The Thomson Reuters Trust Principles.

The opinions expressed are those of the author. It does not reflect the views of the Reuters news agency, which operates in accordance with the principles of trust in impartiality, independence and freedom from bias.

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