Crypto funds notch big January inflows amid surge for tokens

The resurgence in digital assets in January looks like it’s finally tempting investors back to the battered world of crypto ETPs.

More than $US210 million ($294 million) poured into exchange-traded products that track cryptocurrencies in January, the most since May, according to data tracked by Bloomberg Intelligence. Total assets under management grew 37 per cent during the month to $US19.7 billion, also the highest since May of last year, according to CryptoCompare data.

“It’s pretty impressive actually,” said Bloomberg Intelligence analyst Athanasios Psarofagis. “Given how bad the year was last year, to still have inflows, it’s a pretty positive sign for the category.”

About $US40 million flowed into the ProShares Bitcoin Strategy ETF (ticker BITO), its best month since June, while the 3iQ CoinShares Bitcoin ETF (BTCQ), listed in Canada, had an influx of nearly as much. Meanwhile, crypto-centric funds rounded out the top-10 list of the best-performing US equity ETFs year to date – Valkyrie Bitcoin Miners ETF (WGMI) rose about100 per cent, while the VanEck Digital Assets Mining ETF (DAM) added 76 per cent.

Inflows into bitcoin-based funds “have far surpassed movements in funds based on other assets”, wrote Noelle Acheson, author of the Crypto Is Macro Now newsletter.

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Cryptocurrencies have rallied to start the year, buoyed by optimism that much of the saga around FTX’s downfall is a thing of the past, as well as a rise in other asset classes, including stocks. Bitcoin, the largest token by market value, advanced about 40 per cent in January, its best month since October 2021, according to data compiled by Bloomberg.

“Expectations of a less hawkish Federal Reserve, China reopening and receding recession risks in Europe have meant that risk appetite has picked up considerably since bitcoin hit those November lows,” said Fiona Cincotta, senior financial markets analyst at City Index. “The improved market mood has been reflected in the dramatic bitcoin rally at the start of 2023.”

Still, given how big crypto’s gains have been over the past month, many say they’re not likely to be sustained – at least not at their current pace.