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If a series of high-profile multibillion-dollar blow-ups, alleged fraud and a 75% collapse in the price of your biggest asset doesn’t shake faith in the crypto universe, it’s hard to imagine what will.

Even though more than half the money ever invested in bitcoin would now be underwater if it had stayed, crypto monitors insist it’s somehow still attracting punters.

Cryptocurrency and bitcoin investors seem to be showing few signs of dumping their crypto-related assets, stocks and exchange-traded funds (ETFs), despite the latest wave of turmoil and scandal to crash over the sector.

Not so much ‘buying the dip,’ more ‘buying the plunge.’

Institutional investors are thought to have taken fright at the FTX scandal, the lawsuits against its founder Sam Bankman-Fried, and a 50% slump in bitcoin’s price in the last six months.

Analysts at JP Morgan estimate that around $25 billion has flowed out of the crypto since May. People in the sector, however, insist money is still coming in, although it is not clear if these are distressed flows from other parts of the crypto world or new money.

Smaller players, including ‘mom & pop’ investors, are hanging in there, even though the bitcoin bear market has put over 55% of investors underwater on their holdings, according to blockchain analytics firm Glassnode.

If lost supply is taken into account, this is probably the deepest bear market in bitcoin history, Glassnode notes.

Yet figures from CoinShares, the biggest crypto trading group in Europe, show that inflows into digital asset investment products last week totaled $42 million, the most in almost three months.

“It suggests investors see this price weakness as an opportunity to buy, and to move to decentralized exchanges and physically backed ETFs which don’t have the same vulnerabilities as centrally controlled exchanges,” said CoinShares analyst James Butterfield.

Figures from retail investor flows tracker Vanda Research show that inflows into crypto-related stocks and ETFs in the five days after FTX’s collapse totaled $27 million, or a daily average of $5.4 million. That’s down on the year-to-date daily average of $14.4 million, but still marks a positive flow.

Even more remarkable, as bitcoin has plunged 75% from its all-time high in November last year, Vanda says retail investors poured $3.7 billion into crypto-related assets and funds.


Enthusiasts say cryptocurrency is the future of money, empowering individuals, offering financial freedom and liberation from government and central bank controls. Cutting edge technology allows for fast and secure payments too.

The bubble that inflated post-pandemic, however, was a result of something else: a classic speculative, ‘FOMO’ (fear of missing out) frenzy which fed on itself as prices soared.

Millions of people plowed billions of dollars into a market long-criticized for its opaqueness, lack of oversight, and highly speculative nature in the hope of getting rich quick.

Recent events have shaken the industry to its core. Anthony Scaramucci, founder of Skybridge Capital, the firm in which FTX recently bought a 30% stake, said the industry will survive and thrive, but last week was perhaps the toughest of his career.

Long-standing crypto critics and skeptics have not held back. Economist Nouriel Roubini called it a “totally rotten, corrupt, criminal ecosystem,” while Berkshire Hathaway’s Vice Chairman Charlie Munger slammed the “scumballs” in the industry.

It may be that the market meltdown and high-profile allegations of fraud do eventually shift the dial for some investors. But not yet, it seems.

The ProShares Bitcoin Strategy ETF posted a $14.6 million net outflow in the week to Nov. 9, according to Refinitiv Lipper data, the biggest outflow in nine weeks.

But in the following week the fund posted a net inflow of $12.3 million, and as of Nov. 17 the balance for the month stands at a $2.5 million net inflow.

Similarly, this ETF has attracted net inflows of almost $300 million throughout bitcoin’s 75% slide from its all-time high just over a year ago.

It’s hard to get concrete flows data on a wider scale, however, given how opaque the crypto world is. JP Morgan strategist Nikolaos Panigirtzoglou says a good proxy measure is demand for stablecoins, the digital equivalent of cash in the crypto ecosystem that is backed one-to-one by dollar assets.

He estimates that the stablecoin market cap peaked at around $170 billion earlier this year and has declined by around $25 billion since May. That is, $25 billion of redemptions flowing out of crypto, most likely to fiat currency, perhaps cash or cash-like products.

“It would be difficult to imagine a sustained recovery in crypto prices without the shrinkage of the stablecoin universe stopping,” he said.

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