Investors shake off bears and drive biggest crypto inflows of the year

Investors shake off bears and drive biggest crypto inflows of the year

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

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

According to the report, net inflows totaled $474 million last month, including $81 million last week, completing the fifth consecutive week of inflows. Crypto products saw net outflows of $481 million in June.

Year-to-date inbound investments total $496 million, according to CoinShares data.

Bitcoin (BTC) products recorded $326 million in inflows in the first seven months of 2022 - including $306 million in July - while multi-asset products brought in $213 million year-to-date. Solana (SOL) and short Bitcoin offers have reached $114 million and $96 million, respectively, this year.

Although short Bitcoin products saw about $25 million in net inflows last month, Solana and multi-asset products remained roughly flat in July.

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

Although 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.

This trend, which Butterfill said “stood out the most,” is exceeding the Ethereum mainnet’s expectations merge with the Beacon Chain Proof-of-Stake system in the coming months.

Risk-off crypto narratives can be priced in

Ethereum recently went through a series of test merges to work out the kinks of the network's upcoming move to proof-of-stake from its long-standing proof-of-work iteration.

“We believe this is due to increased investor confidence in the implementation of The Merge this year,” Butterfill told Blockworks. “I expect inflows into Ethereum and Bitcoin to continue as we begin to see a softer Fed amid growing economic weakness in the US.”

Ether (ETH) is becoming a “gateway for institutional capital,” according to Joshua Lim, Head of Derivatives at Genesis Global Trading. It is more attractive than Bitcoin to some investors because BTC is linked to collateral liquidations following Three Arrows Capital's bankruptcy as well as miner liquidations.

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

Despite rising bullish sentiment toward digital assets, trading volume for crypto investment products totaled $1.3 billion last week - 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 exhaustion of the bear cycle” over the past month, as well as what appears to be the start of a bottoming process.

“It appears that general risk aversion is largely 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 alternatives, followed by a period of consolidation for the remainder of the summer.”

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The post “Shake Down Bears, Investors Drive Biggest Crypto Inflows of Year” is not financial advice.