Perplexing Market Sees Outflows and Inflows in Crypto Funds

Bitcoin and ether are both pushing higher this year, but outflows from crypto funds could be perplexing market pundits.

Despite the recent retreat below $30,000, bitcoin is still up over 60% for the year. The second-largest cryptocurrency by market capitalization, ether, is up over 50% and recently upgraded to a proof-of-stake network to make operations more efficient.

Still, there’s been steady outflows from crypto funds, according to a recent Coindesk article. Bitcoin’s recent pullback has certainly played a large part — the leading cryptocurrency rose past $30,000 in mid-April before falling to around $26,000 so far in May.

“Digital asset investment products have witnessed outflows for the fifth consecutive week as bitcoin (BTC), the world’s largest cryptocurrency by market capitalization, has traded down in May,” the article noted, also mentioning that outflows have reached $232 million, according to a report from CoinShares.

The largest outflows have been from bitcoin-related products (both bullish and bearish), according to the report. This may be perplexing given that, as mentioned, bitcoin is still up past 60% for the year.

“It is unclear why there is such coordinated negative sentiment for both long and short investment products,” CoinShares said.

Nonetheless, some market pundits see a bullish run ahead. Last year’s bearish run for cryptocurrencies saw a lot of crypto-based firms exit the business, which some view as a cleansing of the industry.

“Nearly all of the bad leverage has been squeezed out. Everyone in the business of shorting bitcoin, rehypothecating bitcoin, loaning bitcoin — they’ve all [gone] bankrupt. The remaining exchanges where you can short it are under a massive amount of regulatory pressure,” said MicroStrategy’s Michael Saylor, a staunch bitcoin bull, in a Markets Insider report.

Altcoins See Inflows

The exit from bitcoin-based funds didn’t mean that inflows dried up across the board. Altcoins saw inflows of $0.7 million and $0.3 million in the past week, according to the aforementioned Coindesk article.

“A proliferation of Bitcoin-altcoin trading pairings appeared alongside altcoins, spurring a rise in market activity as investors took advantage of the erratic nature of these digital currencies to earn high-risk profits,” the article said further.

It’s not just retail trading activity driving the altcoin market. Some speculators see an actual use case for these alt coins that could serve as the next bitcoin or ether in the future, given that technologies and operations in the crypto space are constantly undergoing enhancements.

“As a greater variety of use cases for the technology have been feasible, the advent of altcoins and their corresponding blockchain networks heralds a period of exploration and maturation within the cryptocurrency sector,” the article added.

For more news, information, and analysis, visit the Crypto Channel.