Shaking Off Bears, Investors Drive Year’s Biggest Crypto Inflows

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  • Though out­flows from ether-focused prod­ucts have totaled $315 mil­lion year to date, such offer­ings notched inflows of $138 mil­lion last month
  • ETH is becom­ing “the gate­way for insti­tu­tion­al cap­i­tal,” accord­ing to Gen­e­sis Glob­al Trading’s head of derivatives

Investors, shak­ing off volatile trad­ing ses­sion after trad­ing ses­sion, are once again bull­ish on cryp­to, accord­ing to a new report.

Flows into cryp­tocur­ren­cy invest­ment funds and relat­ed prod­ucts in July marked a rever­sal from June, good for the strongest month­ly inflows this year, accord­ing to a Mon­day report from dig­i­tal asset-focused invest­ment man­ag­er CoinShares.

Net inflows totaled $474 mil­lion last month, accord­ing to the report, includ­ing $81 mil­lion last week, cap­ping off a fifth con­sec­u­tive week of inflows. Cryp­to prod­ucts notched net out­flows of $481 mil­lion in June. 

Year-to-date inbound invest­ments stand at $496 mil­lion, Coin­Shares data indicate. 

Bit­coin (BTC) prod­ucts saw $326 mil­lion of inflows over the first sev­en months of 2022 — includ­ing $306 mil­lion in July — while mul­ti-asset prod­ucts have notched $213 mil­lion year-to-date. Solana (SOL) and short bit­coin offer­ings this year have tal­lied $114 mil­lion and $96 mil­lion, respectively. 

Though short bit­coin prod­ucts had about $25 mil­lion of net inflows last month, Solana and mul­ti-asset prod­ucts were rough­ly flat in July. 

Source: Coin­Shares

Mul­ti-asset invest­ment offer­ings under­went out­flows for the sec­ond con­sec­u­tive week, sug­gest­ing investors are becom­ing more tar­get­ed in their invest­ment, James But­ter­fill, Coin­Shares head of research, wrote in a blog post. 

Though net out­flows from Ethereum-focused invest­ment prod­ucts have totaled $315 mil­lion so far in 2022, the trend reversed in July, when such cryp­to offer­ings record­ed inflows of $138 million. 

That ten­den­cy, which But­ter­fill said “stood out the most,” comes ahead of the Ethereum mainnet’s expect­ed merge with the Bea­con Chain proof-of-stake sys­tem in the com­ing months. 

Risk-off crypto narrative may be priced in

Ethereum has recent­ly under­gone a num­ber of test merges, designed to work out the kinks of the network’s pend­ing switch to proof-of-stake from its long­stand­ing proof-of-work iteration. 

“We believe it is due to improv­ing investor con­fi­dence in The Merge being imple­ment­ed this year,” But­ter­fill told Block­works. “I expect flows into Ethereum to con­tin­ue, and into bit­coin as we start to see a soft­er Fed in the face of grow­ing eco­nom­ic weak­ness in the US.”

Ether (ETH) is becom­ing “the gate­way for insti­tu­tion­al cap­i­tal,” accord­ing to Joshua Lim, head of deriv­a­tives at Gen­e­sis Glob­al Trad­ing. It is more attrac­tive than bit­coin to some investors due to BTC’s asso­ci­a­tion with col­lat­er­al liq­ui­da­tions fol­low­ing the bank­rupt­cy of Three Arrows Cap­i­tal, as well as min­er liquidations. 

“We believe the ETH sound mon­ey the­sis — as ETH becomes defla­tion­ary [ver­sus] BTC’s sup­ply over­hang — makes it the more attrac­tive inflow can­di­date going into The Merge lat­er this year,” Lim told Blockworks. 

Despite ris­ing bull­ish sen­ti­ment toward dig­i­tal assets, last week’s trad­ing vol­umes for cryp­to invest­ment prod­ucts totaled $1.3 bil­lion — com­pared to this year’s week­ly aver­age of $2.4 bil­lion, accord­ing to CoinShares.

Dan Guns­berg, co-founder of Hxro Net­work, said there has been a “gen­er­al exhaust­ing of the bear cycle” over the past month, as well as what appears to be the begin­ning of a bot­tom­ing process.

“It seems that the gen­er­al risk-off nar­ra­tive has large­ly been baked in at this point,” Guns­berg told Block­works. “All things being equal, I would not be sur­prised to see a retest of pre­vi­ous sup­port lev­els in BTC, ETH, SOL and oth­er liq­uid alts fol­lowed by a peri­od of con­sol­i­da­tion through­out the remain­der of the summer.” 

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  • Ben Strack
    Ben Strack is a Den­ver-based reporter cov­er­ing macro and cryp­to-native funds, finan­cial advi­sors, struc­tured prod­ucts, and the inte­gra­tion of dig­i­tal assets and decen­tral­ized finance (DeFi) into tra­di­tion­al finance. Pri­or to join­ing Block­works, he cov­ered the asset man­age­ment indus­try for Fund Intel­li­gence and was a reporter and edi­tor for var­i­ous local news­pa­pers on Long Island. He grad­u­at­ed from the Uni­ver­si­ty of Mary­land with a degree in journalism.

    Con­tact Ben via email at [email pro­tect­ed]

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