Cryptocurrency Coverage: Bunch of Money Bets on Bitcoin's Bruised Allure

Cryptocurrency Coverage: Bunch of Money Bets on Bitcoin’s Bruised Allure

Oct 18 (Reuters) – A growing number of funds are betting on the long-term attractiveness of bitcoin and ether, a brave maneuver in the depths of a crypto winter.

Unfazed by the price crash over the past 11 months, investment firms have unleashed a wave of exchange-traded funds, predicting that cryptocurrencies and their underlying technology will eventually prevail.

Of the more than 180 active crypto-exchange (ETPs) and Trust products traded globally, half of them have launched since the Bitcoin Bear market began, Morgan Stanley said in a note published this month. The spread came even as the total value of assets in the market fell by 70% to $24 billion in that period as cryptocurrency prices plummeted.

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Morgan Stanley said that about 95% of these 180 funds focus on the two largest currencies, bitcoin and ether.

“It’s normal when the market is slower, prices are lower, people lose money, and appetite wanes,” said Chen Arad, co-founder of crypto risk watchdog Solidus Labs. “But that’s not the case in the long run. As a whole, I don’t think anyone is giving up.”

The allure of ETPs is that they provide exposure to digital assets on a regulated exchange, so retail and institutional investors do not have to worry about secure cryptocurrency storage and evading hacks and theft.

In terms of money, crypto investment products have attracted about $453 million in net inflows this year, with much of it going into bitcoin and investment vehicles that include the largest cryptocurrencies, according to a report by digital asset manager Coinshares.

“There is more asset allocation towards baskets that combine the top five or ten crypto assets by market cap. It is a journey to quality compared to alternative assets in the crypto industry,” said Eliezer Ndinga, Director of Research at 21shares.

Other major cryptocurrencies include solana, cardano, and ripple.

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Most active crypto ETP products are registered outside the US, although Switzerland, Canada, Australia, and Brazil are leading the way with instant crypto offerings.

One reason is that US regulators have rejected many applications for bitcoin spot funds, which reflect the step-by-step movements of cryptocurrency prices, citing multiple reasons including the lack of monitoring sharing agreements with regulated markets regarding the underlying assets of the spot funds. .

Investors in futures-based funds must incur the additional cost of renewing futures contracts as contracts approach settlement day, to maintain their position.

Bitcoin has lost 17% in the past three months, while the ETF of ProShares Bitcoin Strategy, which tracks Bitcoin futures, is down about 21%. The world’s largest bitcoin fund, Grayscale Bitcoin Trust (GBTC.PK), is down 34% at the same time.

The ProShares Bitcoin Strategy ETF, has seen its assets under management (AUM) shrink to just over $600 million as of the end of September, according to Refinitiv Lipper data. In her debut a year ago, she made over $1 billion in a matter of days.

At Grayscale’s Bitcoin Trust, assets under management have fallen to $12.2 billion from more than $30 billion at the end of 2021, data from the company shows.

Will Beck, head of digital assets at WisdomTree, whose Bitcoin spot ETF was blocked by US watchdogs last week, said he was not surprised by the decision, but expressed hope that a deal could be reached.

“I think we’ll get there eventually. But we’ll be on hold for the foreseeable future.”

Reuters graphics

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Additional reporting by Medha Singh and Lisa Pauline Matakal in Bengaluru; Editing by Vidya Ranganathan and Praveen Shar

Our criteria: Thomson Reuters Trust Principles.

The opinions expressed are those of the author. They do not reflect the views of Reuters News, which is committed under the Trust Principles to impartiality, independence, and freedom from bias.

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