Tokens surge in January as crypto funds record big inflows

It appears that investors are finally coming back to the battered world of crypto ETPs following January's resurgence in digital assets.

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According to TradeAlgo, more than $210 million was invested in exchange-traded products tracking cryptocurrencies in January, the most since May. According to TradeAlgo data, assets under management increased 37% to $19.7 billion in May, the highest level since May of last year. 

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As Athanasios Psarofagis, analyst noted, "It's pretty impressive.". As a result of the bad year last year, it's pretty encouraging.

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An influx of nearly $40 million flowed into the 3iQ CoinShares Bitcoin ETF (BTCQ), also listed in Canada, during the month, which was its best month since June. The VanEck Digital Assets Mining ETF (DAM) rose 76% and Valkyrie Bitcoin Miners ETF (WGMI) increased approximately 100% year-to-date. Crypto-centric funds rounded out the top-10 list - the Valkyrie Bitcoin Miners ETF (WGMI) climbed roughly 100%, while the VanEck Digital Assets Mining ETF (WGMI) gained roughly 100%. 

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The amount of money flowing into Bitcoin-based funds has far outpaced that of funds based on other assets, according to the "Crypto Is Macro Now" newsletter by Noelle Acheson.

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Since the start of the year, cryptocurrencies have surged, buoyed both by optimism that much of the saga around FTX's downfall is over, and other asset classes, including stocks. Data compiled by TradeAlgo show Bitcoin gained roughly 40% in January, its best month since October 2021.

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According to Fiona Cincotta, senior financial markets analyst at City Index, since Bitcoin hit those November lows, risk appetite has picked up significantly due to expectations of a less hawkish Fed, China reopening and receding recession risks in Europe. Bitcoin's dramatic rally at the start of 2023 reflects the improved market mood."

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However, given the enormous gains crypto has seen over the past month, many say they won't be sustained. 

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In part, markets have rallied as a result of the belief that the Fed is likely to soon cease raising interest rates, which could help buoy riskier assets, but the Fed has disputed that claim. 

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Furthermore, most cryptos are still far off their record highs from November of 2021, when Bitcoin hit near $69,000. In the near term, it's hovering around $23,000, and few, aside from the most optimistic of bulls, are expecting it to regain those highs. 

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“If the economic data out over the next few days confuses the consensus opinion on Fed easing this year, the crypto market may experience further pullbacks,” said Acheson.