Crypto investors looking to diversify as non-bitcoin, ether funds see inflows

Following numerous high-profile crashes seen earlier this year, global crypto investors may be looking to diversify their portfolios to hedge against any more possible black swan events, according to a report by digital asset data provider CryptoCompare.

Data showed that global crypto funds based on assets that come under the umbrella of ‘other’ (representing non-bitcoin and ethereum products) saw the largest asset under management (AUM) gains, rising 12.3% to $1.13 billion as of 23 August.

In terms of net flows, multi-asset and other fund categories had positive flows of $1.3 million and $0.8 million, respectively, during the first three weeks of this month.

The report also said that ethereum-based crypto funds led the bounce-back in July and continued to outperform in August.

Assets for bitcoin-based products fell 7.16% to $17.4 billion during August while ethereum-based products saw gains of 2.36% to $6.81 billion.

“Even at a more granular level, no bitcoin products covered in the report saw AUM or volume gains in the month of August. We could be seeing interest move away from bitcoin in the short term, as ethereum-based products hold the attention with the much-anticipated ‘merge’ on the horizon,“ CryptoCompare said.

Ethereum is transition to proof-of-stake for its consensus protocol. Called the ‘merge’, the software upgrade has been in the works for years, and it will change the way ethereum orders transactions to become more energy efficient.

The reports highlighted that since the end of July 2022, the total AUM across all digital asset investment products have fallen 4 to $25.8 billion (as of the 23 August).

In August, bitcoin’s AUM fell 7.16% to $17.4 billion, and as a result its market share fell to 67.6% of total AUM, down from 76.9% in July. Ethereum products now account for 26.5% of total AUM, their largest market share since the start of the year.

Further, Grayscale products continued to represent the vast majority of AUM at $19.0 billion (73.7% of total) followed by those of XBT Provider at $1.49 billion (5.78% of total) and 21Shares at $1.04 billion (4.04% of total).

Grayscale products are preferred by global institutional investors.

Additionally, AUM represented by ETFs fell in August, down 0.64% to $2.48 billion, controlling 11% of the market share.

As per the report, average daily aggregate volumes across all digital asset investment products fell by an average of 1.01% to $131 million from July to August, highlighting weakness in the market.