Crypto traders are showing signs of renewed confidence, with the digital asset’s market cap surging to $280 billion in July after a devastating sales and credit crisis scared many players out of the market.
Investment products tracking crypto assets have dipped below $400mn since early July, marking the longest continuous weekly net gain since March, according to data from crypto asset management group CoinShares.
“We are starting to see bold investors coming in. [and] take up . . . Long positions and people are not adding to short positions now,” said James Butterfill, head of research at CoinShares.
The first signs of recovery follow a major downturn for the digital assets industry. Bitcoin, the world’s leading cryptocurrency, fell 70 percent from its all-time high in November, while the digital asset’s market cap fell below $1tn, down from a peak of $3tn in November.
The fall in prices led to the collapse of Terra — once one of the industry’s largest stablecoins — and the collapse of several prominent crypto hedge funds and lenders, such as Three Arrows Capital and Celsius.
The crisis in the sector has also hurt investment vehicles such as exchange-traded funds and trusts, which allow investors to take a stake in crypto assets without directly holding the tokens, with investors pulling $481 million in June, according to CoinShares.
In recent weeks, the market has shown tentative signs of recovery, as the market capitalization of the 500 largest tokens exceeded $1tn, increased by 30% in July, and the price of bitcoin was above $20,000.
Ether, the second largest, has gained nearly 40 percent in the past month on speculation that the token will transition to a blockchain or digital ledger with a lower carbon footprint.
Income streams and improving token prices increased total assets under management in crypto investment products to $30bn as of early June, according to CoinShares.
However, Charlie Cooper, managing director at blockchain company R3, warned that the recent rally could be disruptive. “I think the fact that prices are stabilizing in any way is indicative of an inevitable improvement,” he said.
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