Some investors believe bitcoin is nearing a bottom, based on the amount of money flowing into listed cryptocurrency funds, which represent a small portion of the market but are preferred by both institutional and retail investors, according to a post by Reuters.
According to data provider CryptoCompare, total flows into these funds improved steadily last month, with a weekly average inflow of $66.5 million, a reversal from a disastrous April when they experienced a weekly average outflow of $49.6 million.
Ben McMillan, a chief investment officer of Arizona-based IDX Digital Assets said that institutional and, to a lesser extent, individual investors are recognising that the pain has already been felt and that we’re closer to the bottom than the top.
“If you’re getting into crypto at these levels, a little near-term volatility could be worth a long-term payoff, a lot of institutional investors are starting to look at crypto as a source of longer-term growth potential,” he added.
However, it’s difficult to say whether the tentative flows will continue or if the emerging trend will spread all across the global market.
Many investors will be hesitant to re-enter the market after being hammered by concerns about global monetary tightening and increasing inflation. We have seen Bitcoin drop about half of its value since its November high and it has been stuck around $30,000 for the past month.
Retail investors are returning to Cryptocurrency
Despite this, evidence from funds reveals that cryptocurrency is seeing a resurgence among retail investors, although through the perceived safety of exchange-traded products (ETPs), which promise more liquidity and security.
According to Kraken Intelligence, the assets under the management of various bitcoin-futures ETFs have increased in the last week. ProShares Bitcoin Strategy ETF assets have increased by 6%, while Global X Blockchain & Bitcoin Strategy ETF and VanEck Bitcoin Strategy ETF assets have increased by over 3%.
In May, all of CryptoCompare’s listed digital asset investment products lost money, with Grayscale’s Digital Large Cap Fund product losing 38.5% of its value.
Grayscale Bitcoin Trust shares, one of the largest bitcoin funds with over $19 billion in assets, are selling at a 29% discount to net asset value, the sharpest discount since formation and indicating little demand for the product.
As noted by Jack McDonald, the CEO of PolySign, “Bitcoin has been rangebound in concert with the broader market activity of late, investors are looking for a bottom and are uncertain where that is.”