Crypto prices are rising as traders dive back into the digital asset market

Crypto traders are showing signs of renewed confidence, with the market capitalization of digital assets rising by $280 billion in July after a painful sell-off and a credit crisis that forced many players out of the market.

Investment products that track crypto assets have raised nearly $400 million since the start of July, recording the longest streak of sustained weekly net inflows since March, according to data from crypto asset management group CoinShares.

"We're starting to see some bold investors come in [and] take . . . long positions, and people are no longer taking short positions," said James Butterfill, head of research at CoinShares.

The early signs of recovery follow a period of sharp declines in the digital assets industry. Bitcoin, the world's flagship cryptocurrency, fell as much as 70 percent from its all-time high in November, while the size of the digital asset market fell to under $1 trillion from a November high of more than $3 trillion.

Falling prices caused the collapse of Terra - once one of the industry's largest stablecoins - and led to the failure of several prominent crypto hedge funds and lenders such as Three Arrows Capital and Celsius.

The problems for the sector also dealt a blow to investment vehicles such as exchange-traded funds and trusts, which allow investors to bet on crypto assets without directly holding the tokens, with investors withdrawing $481 million in June, according to CoinShares.

In recent weeks, the market has shown tentative signs of recovery, as the market capitalization of the 500 largest tokens recovered to over $1 trillion, up 30 percent in July, and the price of Bitcoin hovered above $20,000.

Ether, the second-largest cryptocurrency, has gained around 40 percent over the past month as expectations grew that the token will move to a blockchain or digital ledger with a lower carbon footprint.

According to CoinShares, inflows and improving token prices have pushed total assets under management in crypto investment products back to early June levels of $30 billion.

However, Charley Cooper, chief executive of blockchain firm R3, warned that the recent rally could fizzle out. “I think that the stabilization of prices by no means indicates an inevitable recovery,” he said.