Last week saw the highest amount of money invested in digital asset funds since at least late 2021, as investors hurried to buy into the anxiety caused by the collapse of Terra. During the week that ended on May 13, the value of the terraUSD stablecoin (UST) dropped to a few cents, erasing almost all of its approximately $18 market capitalization. As a result, the native token of bitcoin, LUNA, which was previously a top-10 cryptocurrency, became practically worthless.
Investors saw the most recent de-pegging of the UST stablecoin and the ensuing large-scale selling-off as a buying opportunity. The weekly inflow of $299 million into Bitcoin-focused funds was the greatest amount received by such funds in a single week since the final week of October 2021. These funds were the most successful ones throughout the last week.
An investment frenzy sprang out on Thursday as a direct reaction to worries that the Luna Foundation Guard, the organization entrusted with assisting the UST in the case of a crisis, may sell its reserve of around 80,000 bitcoins. After deciding to buy Terra, investors hastened to the most stable digital asset possible to protect their capital. After the previous week, the price of bitcoin had recovered the majority of its losses and was trading at about $30,000. Investors had a geographical divide because North American funds were given $312 million in inflows while European funds lost $32 million in outflows.
Bitcoin ETF Purpose, the largest exchange-traded fund in Canada that invests in bitcoin, raked in a stunning $284 million, exceeding the total amount raised by all of its competitors combined. The market sell-off had a devastating effect on funds not exclusively focused on Bitcoin. As a result, $26.7 million flowed out of funds managing ether (ETH), and $5 million flowed out of vehicles concentrating on Solana (SOL). According to recent reports, investors have taken out more than $51 million from funds that invest in blockchain and cryptocurrency-related companies.
Hedge Fund Returns as Capital Inflows
In the two weeks leading up to March 4, investors put $163 million into cryptocurrency investment products and funds, whereas just $15.6 million was put into blockchain stocks. Since the beginning of the year, the system has received 127 million dollars in new funds. The cryptocurrency business had a favorable flip in inflows at the end of January, according to the figures, after five consecutive weeks of negative outflows. As a direct consequence of this, steady returns have been seen in the cryptocurrency fund industry.
The BarclayHedge cryptocurrency traders index had a decrease of 1.5 percent in February. According to the data published last week, 39 funds were reported, accounting for around 43 percent of the total crypto asset managers that the index tracks. The index fell by around 13 percent during January, and it fell by 10 percent during December. According to the chief executive officer of BitBull Capital, “There is truly no anxiety, even with the situation in Ukraine.” According to him, market-neutral hedge funds that BitBull’s DiPasquale handled had positive returns in the first two months due to the price increases seen in bitcoin and ether. Because of the significant increase in the cost of living over the last several years, many individuals are putting money away for savings. In contrast, multi-asset funds, which handle more than one cryptocurrency, had inflows of $8.6 million, indicating that some investors chose a more diversified strategy for cryptocurrency investing.
Terra Supply and Demand
Most commodities’ prices are influenced more by supply and demand than any other factor. The number of coins in circulation primarily determines the market value of Terra and the number of money people is willing to pay. The cryptocurrency is designed to be limited to 21 million coins; as the circulating supply approaches this limit, prices are likely to rise.
When the limit is reached, it is difficult to foresee the future of prices; As large financial players compete for ownership in a dwindling supply environment, Terra’s price will most likely fluctuate in reaction to their actions.
On this note, cryptocurrencies are extremely volatile. You never know when the digital asset will be booming again, so check out your exchange trading platform to be up to date with prices and find the best time to buy Terra or other cryptos.
