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ORLANDO, Fla., Nov 18 (Reuters) – If a series of high-profile multi-billion dollar blowouts, suspected fraud and a 75% crash in the price of your biggest asset don’t shake confidence in the universe of cryptography, it’s hard to imagine what will happen.

Even though more than half of the money ever invested in bitcoin would now be underwater had it remained, crypto monitors insist that it still attracts bettors.

Cryptocurrency and bitcoin investors appear to show little sign of their crypto-related assets, stocks and exchange-traded funds (ETFs) being dumped, despite the latest wave of turmoil and outrage that has descended on the area.

Not so much ‘buy the dip’, more ‘buy the dip’.

Institutional investors are thought to have taken fright FTX Scandallawsuits against its founder Sam Bankman Friedand a 50% drop in bitcoin price over the past six months.

JP Morgan analysts estimate around $25 billion has flowed out of crypto since May. People in the industry, however, insist that the money is still flowing in, although it’s unclear if this is troubled flows from other parts of the crypto world or from new funds.

Small players, including “mom & pop” investors, are clinging to it, even as bitcoin’s bear market has put more than 55% of investors underwater on their holdings, according to blockchain analytics firm Glassnode .

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Factoring in the loss of supply, this is likely the deepest bear market in bitcoin’s history, Glassnode notes.

Yet figures from CoinShares, Europe’s largest crypto trading group, show inflows into digital asset investment products last week totaled $42 million, the most in nearly three months.

“This suggests that investors are seeing this price weakness as an opportunity to buy and switch to decentralized exchanges and physically backed ETFs that don’t have the same vulnerabilities as centrally controlled exchanges,” James said. Butterfield, analyst at CoinShares.

Figures from retail investor flow tracking Vanda Research show that inflows into stocks and crypto-related ETFs in the five days following the FTX collapse totaled $27 million, a daily average of 5, $4 million. That’s down from the year-to-date daily average of $14.4 million, but it still marks a positive flow.

Even more remarkably, as bitcoin plunged 75% from its all-time high in November last year, Vanda says retail investors invested $3.7 billion in crypto-related assets and funds. cryptography.

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SHAKE, RATTLE & ROLL

Enthusiasts say cryptocurrency is the future of money, empowering individuals, providing financial freedom, and freedom from government and central bank controls. State-of-the-art technology also enables fast and secure payments.

The bubble that inflated after the pandemic, however, was the result of something else: a classic speculative, “FOMO” (fear of missing out) frenzy that fed as prices soared.

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Millions of people have invested billions of dollars in a market long criticized for its opacity, lack of oversight and highly speculative nature in hopes of getting rich quick.

Recent Events shook the industry to its core. Anthony Scaramucci, founder of Skybridge Capital, the company in which FTX recently bought a 30% stake, said the industry will survive and thrive, but the past week may have been the toughest of his career.

Longtime critics and skeptics of crypto didn’t hold back. Economist Nouriel Roubini called it a “totally rotten, corrupt and criminal ecosystem”, while Berkshire Hathaway vice-chairman Charlie Munger criticized the industry’s “scumballs”.

The market crash and high-profile fraud allegations may end up being a game-changer for some investors. But not yet, it seems.

The ProShares Bitcoin Strategy ETF saw a net outflow of $14.6 million in the week to November 9, according to data from Refinitiv Lipper, the largest outflow in nine weeks.

But the following week, the fund had a net inflow of $12.3 million, and as of November 17, the month’s balance stood at a net inflow of $2.5 million.

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Similarly, this ETF attracted net inflows of nearly $300 million throughout bitcoin’s 75% plunge from its all-time high just over a year ago.

However, it is difficult to get hard data on flows on a larger scale, given the opacity of the crypto world. JP Morgan strategist Nikolaos Panigirtzoglou says a good indirect measure is the demand for stablecoins, the digital equivalent of cash in the crypto ecosystem that is individually backed by dollar assets.

He estimates that the market capitalization of stablecoins peaked at around $170 billion earlier this year and has declined by around $25 billion since May. That is, $25 billion in redemptions from crypto, most likely in fiat currency, possibly cash or similar.

“It would be hard to imagine a sustained rally in crypto prices without the shrinking universe of stablecoins coming to a halt,” he said.

(Views expressed here are those of the author, columnist for Reuters.)

By Jamie McGeever; Additional Contributions by Medha Singh in Bangalore; Editing by Andrea Ricci

Our standards: The Thomson Reuters Trust Principles.

The opinions expressed are those of the author. They do not reflect the views of Reuters News, which is committed to integrity, independence and non-partisanship by principles of trust.

Thomson Reuters

Jamie McGeever has been a financial journalist since 1998, reporting from Brazil, Spain, New York, London and now back in the United States. Focus on the economy, central banks, policymakers, and global markets – especially currencies and fixed income. Follow me on Twitter: @ReutersJamie



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