Institutional fund flows rise, but crypto markets face slow recovery
Institutional investors are warming up to digital asset funds again, but macroeconomic factors are keeping crypto markets under pressure in the near term.
According to CoinShares’ weekly digital asset flow report published on July 25, there was an inflow of around $30 million last week.
While this figure is quite small in the grand scheme of things, it brings the monthly total up to $394 million, reversing the trend of outflows in recent months.
Bitcoin funds dominated the week with inflows of $19 million, according to the report. Ethereum-based products had inflows of just over $8 million, which is the opposite of the retail market for the asset, which outperformed Bitcoin last week.
European investors dominated the action for the period, with sentiment in the US remaining largely bearish. This is likely due to this week’s macroeconomic double whammy of an interest rate hike and second quarter negative GDP. This technically spells a recession, although US lawmakers are trying to avoid using that word by adjusting terminology and definitions.
Encryption resistance
On July 25, chain-based research firm Glassnode reported that short-term momentum was favorable, but it “remains weighed down by longer-term macro indicators that may take time to form a solid foundation.”
The rally that started in mid-July already appears to be running out of steam as crypto markets have fallen 4% on the day as their market capitalization fell back to the $1 trillion level during the Asian trading session on Tuesday morning.
Glassnode confirmed that speculators had been largely expelled from the Bitcoin markets, as they have found solid support in the low $20K range. “During this process, there is a redistribution of coins from lower conviction to strong conviction holders,” it said.
Investors who are not too concerned about short-term price volatility have been accumulating in anticipation of long-term gains.
The researchers used a number of on-chain calculations to determine that Bitcoin prices had indeed bounced off a local bottom and crossed over key levels such as the 200-week moving average and realized price.
Not so fast …
However, today’s 3.5% decline has seen BTC prices fall back below those levels to trade at $21,170 at the time of writing.
“In the long term, momentum suggests that the worst of the capitulation may be over, but a longer recovery period may be necessary as the ground repair continues,” Glassnode concluded.
More short-term volatility is expected this week as the US prepares its macroeconomic strike against high-risk asset markets, including crypto.
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