The crypto markets are showing signs of stability as the weekend approaches, following a turbulent week that tested how new institutional investors would handle the significant swings that seasoned digital currency traders are accustomed to.
The sell-off in Bitcoin and Ether earlier this week wiped out $367 billion in value, coinciding with a steep decline in Japanese markets. However, rather than panic, these newer crypto traders took the opportunity to buy the dip.
Spot Ether exchange-traded funds (ETFs) saw net inflows of approximately $120 million this week, with most of the buying occurring on Monday and Tuesday when the world’s second-largest cryptocurrency was down 42% from its March peak of over $4,000.
Although spot Bitcoin ETFs have seen net outflows since Monday, data from crypto analytics firm CoinGlass indicates a resurgence in demand by midweek. By Wednesday and Thursday, more than $245 million had flowed into spot Bitcoin ETFs. This influx coincided with Morgan Stanley’s decision to allow its 15,000 financial advisors to recommend these funds, issued by BlackRock and Fidelity, to clients with a net worth exceeding $1.5 million.
Morgan Stanley, one of the world’s largest wealth management firms, is the first major Wall Street player to take this step. Until now, wealth management businesses only facilitated trades in these new spot crypto funds at the specific request of clients.
In a May 13F filing, Morgan Stanley disclosed that out of its $1.5 trillion in assets under management, around $270 million was held in spot Bitcoin ETFs. The upcoming filing deadline on Wednesday will provide the latest insights into how much exposure banks and hedge funds now have to these spot crypto products.
Other major financial institutions and asset managers, who have been conducting in-house due diligence on spot crypto ETFs, may soon feel the pressure to follow Morgan Stanley’s lead.
Spot Ether ETFs, launched less than three weeks ago, have seen relatively modest inflows compared to the blockbuster debut of spot Bitcoin ETFs in January. Bitcoin funds currently hold $54.30 billion in assets under management, compared to $7.25 billion across spot Ether funds. Throughout the week, the crypto market largely mirrored U.S. equities.
The total market capitalization of all cryptocurrencies has recovered hundreds of billions of dollars since Monday, now exceeding $2.1 trillion.
On Friday, Bitcoin reached an intraday high of nearly $63,000, while Ether was trading above $2,700. Over the past 24 hours, more than $100 million in short positions on Bitcoin were liquidated, contributing to Bitcoin’s gains.
Despite these rebounds, both Bitcoin and Ether remain lower than their levels from a week ago, with Ether on track for its worst week in nearly two years. Similar declines were observed in crypto-related stocks, with shares of Coinbase, MicroStrategy, and Bitcoin miner Riot Platforms posting their third consecutive weekly losses.
This week’s crypto price movements have highlighted the extent to which digital assets continue to track U.S. stocks and react to the same macroeconomic factors.
Earlier in the week, the unwinding of the yen carry trade exacerbated global market turmoil. However, on Thursday, better-than-expected jobless claims data helped ease recession fears, leading to the S&P 500’s best day in almost two years and a strong recovery in the crypto market.
Regulatory developments also seem to be favoring the crypto industry. In a recent legal battle against the U.S. Securities and Exchange Commission (SEC), District Judge Analisa Torres ordered Ripple to pay $125 million in civil penalties—a far cry from the $2 billion the SEC had sought. Following the news, Ripple’s XRP token surged 22% on Thursday.
