Weary cryptocurrency investors pining for a recovery in beaten-down Bitcoin can take some solace from an unusual intraday price recovery that's tended to presage rallies in the largest digital token.
The pattern emerged on October 13, when Bitcoin stormed back from a 5 per cent swoon during the trading session to end up more than 1 per cent. The about-face was overshadowed by a five-percentage-point turnaround in the S&P 500 equity index on the same day, a revival that left strategists open-jawed.
There have been 15 sessions since December 2018 when Bitcoin wiped out a minimum 5 per cent intraday slide to finish with a gain of at least 1 per cent. It averaged a 19 per cent advance 60 days after such signals, data compiled by Bloomberg shows.
Bitcoin slid to about $18,201 last Thursday before closing at roughly $19,387. The token has shed 58 per cent in 2022, hurt but rapid-fire central bank interest-rate hikes that drained liquidity from markets in a fight against inflation.
It's been stuck in a low-volume, low-volatility trading range since mid-June, leaving some onlookers fretting that the overall weight of evidence raises the risk of further declines.
"The current inflationary environment remains challenging for risk assets, including cryptocurrencies," but Bitcoin has continued to respect a support level around $18,000, said John Toro, the head of trading at digital-asset exchange Independent Reserve in Sydney.
Flurry of funds bet on bruised Bitcoin's allure
A growing number of funds are betting on the long-term appeal of Bitcoin and Ether, a gritty gambit in the depths of a crypto winter.
Unfazed by a collapse in prices over the past 11 months, investment firms have unleashed a flurry of exchange-traded funds, anticipating that elite cryptocurrencies and their underlying technology will eventually prevail.
Of more than 180 total active crypto exchange traded products (ETPs) and trust products globally, half have launched since the Bitcoin bear market started, Morgan Stanley said in a note published this month. The proliferation came even as the total value of assets in the market slumped 70 per cent to $24 billion in that period as crypto prices tanked.
About 95 per cent of those 180 funds are focused on the top two coins, Bitcoin and Ether, Morgan Stanley said.
"Naturally when the market is slower, prices are lower, people have lost money, the intensity of the appetite does diminish," said Chen Arad, co-founder of crypto risk monitoring firm Solidus Labs. "But it's not the case in the long run. As a whole, I don't think anyone is giving up." The attraction of ETPs is that they provide exposure to digital assets on a regulated stock exchange, so retail and institutional investors don't have to worry about securely storing their crypto and eluding hacks and heists.
In terms of money, cryptocurrency investment products have attracted about $453 million in net inflows this year with much of it going into Bitcoin and investment vehicles that include the biggest cryptocurrencies, according to a report from digital asset manager Coinshares.
"There is more asset allocation towards baskets that combine the top five or 10 crypto assets by market cap. It's a flight to quality compared to alternative assets in the crypto industry," said Eliezer Ndinga, director of research at 21shares.
Other major crypto: Solana, Cardano, Ripple
Most active crypto ETP products are registered outside the US, though, with Switzerland, Canada, Australia and Brazil racing ahead with spot crypto offerings.
Bitcoin has lost 17 per cent in the past three months, while ProShares Bitcoin Strategy's ETF, which tracks Bitcoin futures, has shed about 21 per cent. The world's largest Bitcoin fund, Grayscale Bitcoin Trust, is down 34 per cent in the same time.
ProShares Bitcoin Strategy ETF, has seen assets under management (AUM) shrink to just over $600 million as of the end of September, according to Refinitiv Lipper data. At its debut a year ago it pulled in over $1 billion in a matter of days.
At Grayscale's Bitcoin Trust, the AUM have tumbled to $12.2 billion from over $30 billion at the end of 2021, data from the firm showed. Will Peck, head of digital assets at WisdomTree, whose spot bitcoin ETF was blocked by US watchdogs last week, said he wasn't surprised by the decision, but expressed hope that an agreement could be reached.
"I think we'll ultimately get there. But we'll be in a holding pattern for the foreseeable future."
