What Will Happen to Bitcoin After Cryptocurrency Fund Assets Shrink by $1 Billion a Week?
2022-05-26 17:04:20
Will JPMorgan Bank Strategist's Predictions for Bitcoin Be Accurate?
The overnight collapse of TerraUST, the world's third-largest stable coin, triggered a dramatic shock in the cryptocurrency market in early May, causing Luna, once a top 10 cryptocurrency, to fall to almost nothing, with other cryptocurrencies such as Bitcoin and Ethereum also being implicated.
According to CoinShares, global cryptocurrency funds saw net inflows of $274 million in the first week ending May 13, the first week the UST was off its $1 anchor price, not only reversing four straight weeks of net outflows in April but also marking the highest net inflows since the second half of 2021. The surge in net inflows to cryptocurrency funds suggests that investors see the recent de-anchoring of USTs and the widespread sell-off they triggered as a buying other tokens opportunity, according to James Butterfill, head of research at CoinShares.
In the following week after the collapse, however, the agency released data showing net outflows of up to $141 million from cryptocurrency funds, and the size of cryptocurrency funds' assets under management fell to just over $38 billion, the lowest level since July 2021, from more than $39 billion the week before.
Among all types of cryptocurrencies, cryptocurrency funds associated with Bitcoin experienced the most severe capital flight. During the week ending May 20, there was a net outflow of $154 million from cryptocurrency funds for Bitcoin, compared to a net fund inflow of $299 million for Bitcoin the week before, ranking first among all categories of cryptocurrency funds at the time.
This money flow is also reflected in Bitcoin’s price over the last month, which plunged from nearly $34,000 to nearly $30,000 overnight after UST broke away from its $1 anchor price on May 9, and has since fallen below $30,000. The current Bitcoin price on the international digital currency Gate.io exchange is trading at $29,598.31 at the time of writing and has a volume of $21,954,891,266 in 24 hours.
Despite the large outflows, overall Bitcoin fund flows have remained positive so far in May, with net inflows of $187.1 million. Year-to-date Bitcoin fund net inflows are $307 million. The total asset size of cryptocurrency funds focused on Bitcoin is currently about $25.1 billion.
Some investors are predicting that this is not the nadir of Bitcoin's decline and that it will fall to a much lower price, such as below $30,000 in June. But JPMorgan Bank said in a report released Wednesday, May 25, that cryptocurrencies have surpassed real estate as one of its favored "alternative assets”. The sell-off has done more damage to the value of cryptocurrencies than other alternative assets such as real estate, private equity, or private debt.
Its strategist, Nikolaos Panigirtzoglou, also said in the report that the current Bitcoin has performed as if it had surrendered in the past almost a month, but that everyone should look more to the future and be bullish on more upside for the cryptocurrency. The report also predicts that the Bitcoin price live will rise back to around $38,000 shortly. While touting the upside of cryptocurrencies, analysts also mentioned that the current state of financial markets requires a shift in exposure to alternative assets from "Increase in holdings" to "reduce holdings". Investors must be wary of a possible continued downtrend in alternative assets, especially in light of the current deterioration in market conditions.
The overnight collapse of TerraUST, the world's third-largest stable coin, triggered a dramatic shock in the cryptocurrency market in early May, causing Luna, once a top 10 cryptocurrency, to fall to almost nothing, with other cryptocurrencies such as Bitcoin and Ethereum also being implicated.
According to CoinShares, global cryptocurrency funds saw net inflows of $274 million in the first week ending May 13, the first week the UST was off its $1 anchor price, not only reversing four straight weeks of net outflows in April but also marking the highest net inflows since the second half of 2021. The surge in net inflows to cryptocurrency funds suggests that investors see the recent de-anchoring of USTs and the widespread sell-off they triggered as a buying other tokens opportunity, according to James Butterfill, head of research at CoinShares.
In the following week after the collapse, however, the agency released data showing net outflows of up to $141 million from cryptocurrency funds, and the size of cryptocurrency funds' assets under management fell to just over $38 billion, the lowest level since July 2021, from more than $39 billion the week before.
Among all types of cryptocurrencies, cryptocurrency funds associated with Bitcoin experienced the most severe capital flight. During the week ending May 20, there was a net outflow of $154 million from cryptocurrency funds for Bitcoin, compared to a net fund inflow of $299 million for Bitcoin the week before, ranking first among all categories of cryptocurrency funds at the time.
This money flow is also reflected in Bitcoin’s price over the last month, which plunged from nearly $34,000 to nearly $30,000 overnight after UST broke away from its $1 anchor price on May 9, and has since fallen below $30,000. The current Bitcoin price on the international digital currency Gate.io exchange is trading at $29,598.31 at the time of writing and has a volume of $21,954,891,266 in 24 hours.
Despite the large outflows, overall Bitcoin fund flows have remained positive so far in May, with net inflows of $187.1 million. Year-to-date Bitcoin fund net inflows are $307 million. The total asset size of cryptocurrency funds focused on Bitcoin is currently about $25.1 billion.
How Long Will Bitcoin's Decline Last?
Some investors are predicting that this is not the nadir of Bitcoin's decline and that it will fall to a much lower price, such as below $30,000 in June. But JPMorgan Bank said in a report released Wednesday, May 25, that cryptocurrencies have surpassed real estate as one of its favored "alternative assets”. The sell-off has done more damage to the value of cryptocurrencies than other alternative assets such as real estate, private equity, or private debt.
Its strategist, Nikolaos Panigirtzoglou, also said in the report that the current Bitcoin has performed as if it had surrendered in the past almost a month, but that everyone should look more to the future and be bullish on more upside for the cryptocurrency. The report also predicts that the Bitcoin price live will rise back to around $38,000 shortly. While touting the upside of cryptocurrencies, analysts also mentioned that the current state of financial markets requires a shift in exposure to alternative assets from "Increase in holdings" to "reduce holdings". Investors must be wary of a possible continued downtrend in alternative assets, especially in light of the current deterioration in market conditions.
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