For the past seven weeks in a row, crypto funds are continuously receiving major inflows from all around the globe, particularly from North American and European investors. The last week saw record inflows for this year, totalling USD 274 million (more than INR 2,100 crore).
It becomes all the more interesting since the inflows are continuously pouring in despite the fact that the digital assets are experiencing a slide in their value due to the risk-off sentiment in the financial markets. So, why is this happening? Let’s find out!
Why are crypto inflows surging when prices are dropping?
The inflows for crypto funds are setting new records every week. This is despite regulatory concerns regarding digital assets, which are causing price plunges every now and then. For instance, LUNA, the crypto which has been at the center of these inflows and regulatory concerns, saw a massive 99% fall in its assets under management (AUM) and at the same time managed to attract USD 0.043 million (Over INR 31 lakh) from investors last week. So, why and how are crypto funds managing to retain and gain investors’ confidence despite sliding prices?
According to popular opinion, investors are trying to take advantage of the significant price weakness to average their holdings and add more to their positioning. The large volume of inflows signals that the recent de-peg of the UST stable coin and its major sell-off is being seen as a big investment opportunity by crypto investors all over the world.
However, even if the investors are adopting the strategy of buying more at lower prices, they are still being very conservative in their approach as a majority of them are parking their money in Bitcoin, the oldest and largest crypto asset by market share. In fact, investors are also putting their money in Bitcoin contracts with the segment witnessing a record inflow of USD 4 million (more than INR 31 crore) over the last week’s time. In fact, the major benefactor of the inflows is Bitcoin, which has witnessed a price drop of nearly 50% since its November peak.
However, there are outflows as well…
The following table illustrates the flow of money from and towards crypto funds over the last week:
|Crypto Asset||Week Flows (USD)||MTD Flows (USD)||YTD Flows (USD)||AUM (USD)|
|Bitcoin||298.6 million||343.7 million||463 million||25,832 million|
|Ethereum||− 26.7 million||− 41.8 million||− 236 million||8,999 million|
|Multi-Asset||8.6 million||11.1 million||160 million||3,518 million|
|Binance||–||–||− 21 million||333 million|
|Solana||− 5.3 million||− 3.5 million||102 million||133 million|
|Litecoin||0.2 million||0.2 million||3 million||115 million|
|Tron||0.3 million||0.3 million||− 3 million||73 million|
|Polkadot||− 0.6 million||− 1.0 million||− 2 million||38 million|
|Cardano||0.3 million||0.4 million||8 million||38 million|
|Ripple||2 million||0.5 million||4 million||37 million|
|Others||− 1.4 million||2.8 million||105 million||139 million|
|Total||274.2 million||312.8 million||583 million||39,254 million|
Source: Bloomberg, CoinShares; Data As of May 13, 2022
As seen above, there are some crypto assets that are also seeing outflows, such as Ethereum, which witnessed an outflow of USD 26.7 million (more than INR 207 Crore). Similarly, Solana saw an outflow of USD 5.3 million (more than INR 41 Crore).
These outflows can be attributed to measures announced by US President Joe Biden last month regarding the assessment of potential risks, both financial as well as economic, in relation to cryptos. These measures included policy development for the protection of its users and businesses from the illegitimate use of these digital assets.
However, despite these outflows, on a net level, it appears that investors are still supportive of crypto inflows and it can be believed that in the arriving future we will only see this support rising. This can be concluded by taking the stock market as a precedent which often sees plunges and then amazes its investors with record-setting recoveries.
As we know, cryptos are volatile yet it continues to attract both affirmative and critical attention from investors, businesses, governments, and the media. There is no escaping the fact that crypto prices fluctuate vigorously, at times due to the dynamic share market sentiments and at other times due to geopolitical events.
So, if you are interested in reading more insights like these or are planning to start your crypto journey, look no further, and start trading on Zebpay, India’s largest, oldest, and most secure crypto exchange.