Crypto traders are showing signs of renewed confidence, with the digital asset’s market capitalization surging by $280 billion in July after a painful sell-off and credit crunch that had spooked many market players.
Investment products that track crypto assets have accumulated just under $400 million since the start of July, racking up the longest period of sustained weekly net inflows since March, according to data from the management group CoinShares crypto assets.
“We are starting to see some bold investors come in [and] take. . . long positions, and people are not adding to short positions now,” said James Butterfill, head of research at CoinShares.
The first signs of a rebound follow a period of sharp declines for the digital asset industry. Bitcoin, the world’s flagship cryptocurrency, fell as much as 70 percent from its all-time high in November, while the digital asset’s market size dipped below $1 trillion, down from a peak of November of more than 3 billion dollars.
The fall in prices led to the collapse of land, once one of the largest stablecoins in the industry, and led to the failure of several crypto hedge funds and prominent lenders such as Three Arrows Capital and Celsius.
The problems for the sector also dealt a blow to investment vehicles such as exchange-traded funds and trusts, which allowed investors to make a point of crypto assets without holding the tokens directly, with investors pulling out 481 million dollars in June, according to CoinShares.
In recent weeks, the market has shown tentative signs of recovery, as the market capitalization of the largest 500 chips recovered above $1 billion, up 30 percent from July, and the price of bitcoin stood above $20,000.
Ether, the second-largest cryptocurrency, has gained about 40 percent over the past month as the token was expected to move to a blockchain, or digital ledger, that has a lower carbon footprint.
According to CoinShares, inflows and improving token prices have pushed total assets under management in crypto investment products to early June levels of $30 billion.
However, Charley Cooper, CEO of blockchain firm R3, warned that the recent rally could fail. “I think the fact that prices have stabilized in any way indicates an inevitable rebound,” he said.
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