Jan 31 (Reuters) – After a record run for bitcoin, large investors are once again taking the plunge into the crypto waters.
Digital Asset funding products, which are often preferred by institutional traders, saw inflows of more than $117 millions last week. This is the largest weekly surge since last July, according to data from CoinShares, an asset manager.
Bitcoin accounted for the bulk of the draw, with $116 million. Crypto Funds’ total assets under management have risen to $28 billion, a 43% increase from the November lows. The sector was rattled by the FTX trading crash.
“Generally, people are more confident than they were a month ago,” said Joseph Edwards, investment advisor at Enigma Securities.
The original cryptocurrency, Bitcoin, has risen by almost 40% over the past year. January marked its highest monthly performance since its launch in October 2021 and its second-best January in the last 10 years.
Some traders are hopeful that the long crypto winter is finally over, thanks to the rally and a potentially brighter macro picture. The US is expected to be a major market for traders as the Federal Reserve is likely to raise its benchmark rates by 0.2% this week. This is the smallest increase since it began its tightening cycle last year.
“If peak inflation is behind us for now, then long-term interest rates may decline as we near the end of the inflation-focused rate hike cycle,” Analysts at Fidelity Digital Assets wrote.
“This could signal positive momentum on the macro front for assets like bitcoin.”
Activity in the options market showed that traders were quick to place bets right after the announcement. Bitcoin Fear & Greed Index, an indicator of market sentiment, was cited by crypto liquidity provider, B2C2.
CoinShares reports that both buying and selling volumes are growing. Average weekly volumes have increased by 11%. This suggests that traders are returning from months of reduced activity.
The fact that cryptocurrencies are not going away anytime soon is a sign of things to come. If the Federal Reserve takes a more hawkish tone this week, it might still dampen the party.
