Jimmy McGiver *
If a series of massive multi-billion dollar setbacks, alleged fraud, and a 75% crash in the price of the largest asset has not shaken the confidence of some in the crypto world, it is hard to imagine something that does.
Despite more than half of the money invested in Bitcoin evaporating into the crypto space and its price dropping by more than 55% in the past six months, as well as the recent wave of turmoil and scandals hitting the sector, cryptocurrency market analysts at JPMorgan They insist it continues to attract bettors from everywhere, and they show few signs of dumping the assets, stocks and exchange-traded funds linked to those currencies.
Analysts estimate that around $25 billion has vanished from the cryptocurrency market since last May. However, people in the sector insist that money is still flowing in, although it is not clear if this is faltering inflows from other parts of the crypto world or new money.
Even smaller players, including “mom & pop” investors, the newbies who invest very little in the stock market, are convinced of this. And if the lost supply is factored in, this is likely to be the deepest bear market in Bitcoin history, according to blockchain analysis firm Glassnode.
However, figures from Coinshares, Europe’s largest investment and cryptocurrency trading group, show that inflows into digital asset investment products reached $42 million in the second week of November, the largest in almost three months.
“The data suggests that investors see this price weakness as an opportunity to buy, moving to decentralized exchanges and physical-backed ETFs, which do not have the same vulnerabilities as centrally controlled exchanges,” said James Butterfield, an analyst at CoinShares. ».
Figures from Vanda Research, a firm that tracks individual investor inflows, show that inflows into crypto-related stocks and ETFs reached $27m in the five days after the FTX crash, a daily average of $5.4m. Although it is below the year-to-date daily average of $14.4 million, it still represents a positive flow.
More importantly, despite bitcoin’s 75% drop from its all-time high in November last year, retail investors poured $3.7 billion into crypto-related assets and funds. According to “Vanda”
Enthusiasts say that cryptocurrency is the future of money, empowering individuals, providing financial freedom, freedom from government and central bank controls, and enabling the latest technology for fast and secure payments as well. However, the bubble that inflated after the pandemic was the product of something else, something related to the classic speculative frenzy, or “fear of missing out,” a frenzy that fed on itself as prices rose. Millions of people have invested billions of dollars in a market that has long been criticized for its ambiguity, lack of oversight, and highly speculative nature, hoping to get rich and quick.
Recent events have shaken the industry to its core. “The industry will continue and thrive,” said Anthony Scaramucci, founder of Skybridge Capital, the investment management firm in which FTX owns a 30 percent stake, even though the past week was perhaps the toughest of his career.
In addition, long-time critics and skeptics of cryptocurrencies have not backed down from their opinions, with economist Nouriel Roubini describing the recent acquisition as “a completely rotten and rotten criminal ecosystem,” while Berkshire Hathaway chairman Warren Buffett and his vice president, Charlie Munger, continue to criticize the industry. and its patrons.
Some might think that the market crash and high-profile allegations of fraud have finally turned the tide for some investors. But not yet, apparently. The exchange-traded fund ProShares reported a net inflow of $14.6 million in the week ending Nov. 9, according to Refinitiv data, the largest outflow in nine weeks. But in the following week, the fund reported a net inflow of $12.3 million, and as of November 17, the balance for the month was $2.5 million in net inflows. Similarly, these exchange-traded funds attracted net inflows of about $300 million by sliding bitcoin from its all-time high just over a year ago.
It’s hard to come by concrete streams data on a larger scale, however, given how murky the crypto world is. A good gauge, say JPMorgan strategists, is the demand for stablecoins, the digital equivalent of cash in the cryptocurrency ecosystem backed by individual dollar assets. Here, the global investment banking firm estimates that the market capitalization of stablecoins peaked at about $170 billion earlier this year, and then declined by about $25 billion starting in May. This means an outflow of $25 billion in recoveries from decentralized cryptocurrencies to their likely centralized counterpart. Thus, JPMorgan believes that it will be difficult to imagine a sustainable recovery in cryptocurrency prices without stopping the shrinkage of the stablecoin world.
* Journalist at Reuters.