Global investors are scooping up stakes in cryptocurrency funds and companies, as they seek exposure to a sector many believe could withstand the fallout from the Russia-Ukraine conflict.
Research firm Fundstrat, in its latest note to clients, said venture capital (VC) buyers invested around $4 billion in the crypto space in the last three weeks of February. VCs poured in another $400 million to start-ups in the sector last week, data showed.
The VC investment is consistent with broad weekly inflows. Since the beginning of the year, weekly investments in the industry have been averaging anywhere between $800 million to about $2 billion, Fundstrat data showed.
New crypto funds also raised nearly $3 billion over the last two weeks as of Friday, the most so far this year.
“The conflict in Ukraine has weaponized our financial and digital economy and really accelerated blockchain adoption,” said Paul Hsu, founder and chief executive officer of Decasonic, a $50-million hybrid fund investing in both digital assets and venture capital. He added that there’s demand of up to $200 million to invest in his fund.
“We are seeing a re-allocation to crypto and blockchain away from real estate and bond funds, for instance, because of higher interest rates. I’ve seen this with my funds but unfortunately, because I’m closed-end, I cannot admit more funds nor investors,” Hsu said.
Refinitiv Lipper data showed that U.S. investors pulled a net $7.8 billion out of bond funds in the week to March 9.
Real estate funds saw net outflows of $707 million in the same period, after posting outflows worth $1.15 billion the previous week.
“Crypto native companies are still raising at very high valuations and many funding rounds are still oversubscribed,” said George Melka, chief executive officer at crypto broker SFOX. “In fact, crypto startup valuations are probably the highest I’ve seen.”
Bain Capital Ventures, a unit of private equity firm Bain Capital, for instance, announced early last week that it is launching a $560 million fund focused exclusively on crypto-related investment.
Crypto assets have outperformed traditional risk-on assets such as stocks during the crisis. Bitcoin rose 12.2% last month, while ether gained 8.8%. Since bottoming on Feb. 24 when Russia invaded Ukraine, the digital currencies have gained 14.5% and 13.5%, respectively, while the S&P 500 rose just 3.2%.
CAPITAL INFLOWS, HEDGE FUND RETURNS
Crypto investment products and funds saw $163 million in new institutional money in the two weeks to March 4, while inflows into blockchain equities totaled about $15.6 million, according to data from asset manager CoinShares.
The inflows of $127 million were the largest seen so far this year. Flows into the crypto sector turned positive in late January, after five straight weeks of outflows, CoinShares data showed.
Crypto fund returns have stabilized.
The BarclayHedge cryptocurrency traders index was down at 1.5% for the month of February, according to data posted on Monday, with 39 funds reporting or about 43% of the total crypto asset managers it tracks. In January the index fell nearly 13% and in December it fell 10%.
“There’s really no panic even with the Ukraine conflict,” said Joe DiPasquale, chief executive officer at BitBull Capital, which manages a crypto fund of funds and two hedge funds.
BitBull’s two hedge funds, which employ market-neutral strategies, were up on the year, DiPasquale said, benefiting from the recovery of bitcoin and ether in the month of February.
“People are starting funds, encouraged by the appreciation in prices over the last couple of years,” he said.
(Reporting by Gertrude Chavez-Dreyfuss; Editing by Alden Bentley and Nick Zieminski)
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
