Institutions Buy the Dip As A Record $1.31 Bln Investment Flows into Crypto Funds
Institutions took advantage of the dip as a record $1.31 billion investment flowed into cryptocurrency funds and products last week, as per CoinShares Report.
However, the decline in prices saw total assets under management (AUM) in the industry sliding to $29.7 billion as of Jan. 22, from Jan. 8 peak of $34.4 bln, but still higher than $2 billion at the end of 2019.
“We believe investors have been very price-conscious this year due to the speed at which prices in bitcoin achieved new highs,” said James Butterfill, investment strategist at CoinShares. He further said the recent price weakness has been “a buying opportunity with inflows breaking all-time weekly inflows.”
After hitting ATH at $42,000 on Jan 8, the Bitcoin price dropped just under $29,000 on Jan 21st, the price of BTC is ranging around $30k. About 97% of the investment inflows were recorded by only Bitcoin, while Ethereum posted only $34 million inflows last week.
Rising Investor Demand
Grayscale, the world’s largest digital currency manager, registered $24 billion in AUM last week, down from $28.2 bln on Jan. 8. CoinShares’ was also down from $3.4 bln to $2.9 bln during the same period.
“I think this coming year you're actually going to see a lot more options for an investor to be able to access this asset class,” said Michael Sonnenshein, CEO of Grayscale.
At the moment, Sonnenshein said the Grayscale team is focused on their existing products and is “looking to grow the product suite over the course of this year to meet rising investor demand for exposure to other parts of the asset class.” In his interview, he further noted that Bitcoin’s recent peak came “at the same time that we saw record outflows from gold products.”
In addition to that narrative, “over the course of the year as we saw in ever more fiscal stimulus being injected into the financial system, many investors were drawn to bitcoin for its verifiable scarcity. And I do believe that that continues to be a theme that attracts them to the asset class as it seems to not be something that we're going to be getting off at any time in 2021,” Sonnenshein said.
DeFi Exposure Yields Greater Returns
Interestingly, during the bull run of 2020, hedge funds that actively manage cryptos underperformed the leading digital asset by recording an average return rate of 166% compared to Bitcoin’s over 300% uptrend, according to Crypto Fund Research.
However, those funds with exposure to DeFi projects exceeded the average, and at least one fund posted more than 700% gain while ten funds had over 300% growth.
“The top-performing funds were funds that were long-only,” said Josh Gnaizda, founder of Crypto Fund Research. “Some of them might even have levered exposure. It may also be that they have exposure to cryptos besides Bitcoin that have done well as well. Some of the DeFi products have done very well that year.”
There were about 820 crypto funds at the end of 2020, slightly down from the year before.