Smart Money Goes Short As Macros Cast Gloom On Crypto

Digital assets are a relatively new asset class that made smart money investors fall in love with high gains during the 2021 bull market.

Traditional finance institutions like venture capital firms then poured billions onto the crypto market, boosting development of certain protocols and projects.

However, the 2022 bear market dealt a heavy blow on the pockets of smart money investors. Some firms even froze investment in crypto startups.

CoinShares data sheds a clearer picture of how smart money feels about crypto – and it is not all looking rosy for the crypto market as a whole this year.

Institutions Short As Macro Data Strengthen Bears

According to the report, digital asset investment products saw an average weekly outflow of $2 million. This figure might be relatively small, but this supposedly minor outflow is masking the broader bearish sentiment in the market.

Companies that released cryptocurrency-based investment products saw major outflows of almost $7 million. 

Sorted by assets, Bitcoin saw the biggest outflow from smart money. Totaling $12 million in the weekly and $17 million in the monthly, it leads the metric by a huge margin.

Ethereum, on the other hand, only experienced $200k of outflows in the weekly with the monthly outflow only totaling $1.6 million. 

Short products have been a popular choice for institutional investors. Short-Bitcoin is up nearly $10 million in inflows showing that investors are incredibly bearish of the long term for Bitcoin and the crypto market as a whole. 

CoinShares notes that this shows the sensitivity of institutional investors to regulatory actions on crypto. Add the fact the macros that are not exactly bullish as of now.

What Is Smart Money?

Smart money is a term used to describe investments made by individuals or institutions with significant knowledge, experience, and resources in a particular industry or market.

These investors typically have access to valuable information and use their expertise to identify and capitalize on opportunities that the general public may not be aware of.

Smart money investors are often well-connected and may have access to inside information or expert analysis that can help them make informed investment decisions.

As a result, their investments tend to be more successful and profitable than those made by the average investor.

In some cases, smart money investors may also provide financial backing or support to promising startups or innovative businesses that they believe have significant growth potential.

Crypto’s Growing Popularity

Meanwhile, the rising popularity of crypto has prompted many countries to compete for the top spot for its adoption. Recent research shows that other markets like Hong Kong and Brazil show promise in terms of crypto adoption. 

With crypto debit and credit cards already in the market, the future of crypto is still bright despite the current headwinds it is facing.

Crypto total market cap at $1 trillion on the weekend chart | Chart: TradingView.com

These markets also support the adoption of cryptocurrencies, with research estimating that the space may draw 1.5 billion users even with conservative adoption rates.

As we move forward, institutional investors can also flock back to digital assets when the macroeconomic situation improves.

 

At the time of writing, Bitcoin was trading at $23,776, down 2.6% in the last seven days, data from Coingecko shows.

-Featured image from Reaction.Life