Global investors have been pouring money into cryptocurrency funds and companies after seeing how digital assets were used during the conflict in Ukraine.
Research firm Fundstrat reported in its latest note to clients that venture capital investments in the crypto space reached nearly $4 billion in the last three weeks of February. According to statistics, $400m has flowed from VCs to regions in the past week alone.
Late last week, new crypto funds also raised nearly $3 billion in the past two weeks. Fundstrat says VC investments have been in line with broad weekly inflows, averaging anywhere between $800m to nearly $2bn.
“The conflict in Ukraine has weaponized our financial and digital economy and has really accelerated blockchain adoption,” said Paul Hsu, CEO of hybrid fund Decasonic. “For example, due to higher interest rates, we are seeing a re-allocation of crypto and blockchain away from real estate and bond funds.”
So far, since the start of the crisis, crypto assets have outperformed traditional high-risk assets. Since the start of the attack on February 24, Bitcoin and Ethereum have gained 14.5% and 13.5%, respectively, while the S&P 500 has gained only 3.2%.
Crypto funds continue to flow
In the two weeks leading up to March 4, $163m in new institutional money flowed into crypto investment products and funds, according to data from asset manager CoinShares. The weekly report details how the $127m inflow has been the highest ever this year.
However, as reported by CoinShares, digital asset investment products saw an outflow last week for the first time since mid-January. Around $100m in outflow was also the largest amount for the past nine weeks.
Despite the positive response from the crypto industry following President Joe Biden’s executive order on cryptocurrency last week, the report cited growing regulatory concern from investors.