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Crypto Funds’ Assets Reach Record High as Investors Hedge and Diversify

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Assets in crypto funds surged to an all-time high in May amid easing trade tensions and growing investor appetite for digital currencies as tools to hedge market volatility and diversify away from U.S. assets.

Data from Morningstar covering 294 crypto funds shows net inflows of $7.05 billion last month—the highest since December—pushing total assets under management to a record $167 billion.

Nicolas Lin, CEO of fintech firm Aether Holdings, noted that bitcoin is “starting to come into its own again,” transitioning from merely a high-volatility asset to one increasingly used for hedging exposure. Over the past three months, bitcoin has risen more than 15%, outperforming the MSCI World Index’s 3.6% gain and gold’s 13.3% increase.

Analyst Nic Puckrin of Coin Bureau cited a loss of faith in the U.S. investment outlook as a key driver behind bitcoin’s rise. With the dollar projected to weaken, bond yields rising, and equity markets uncertain, bitcoin has maintained strength. Institutional inflows have further supported bitcoin, especially after U.S. approvals of spot bitcoin and ether ETFs.

Contrasting crypto funds, Lipper data showed $5.9 billion flowed out of global equity funds in May, and gold funds experienced their first outflow in 15 months, at $678 million—highlighting a broader shift toward portfolio diversification.

Lin anticipates that crypto inflows will remain strong but steadier than the initial rush following ETF launches. “What’s happening now is more important — it’s the start of crypto becoming a permanent fixture in diversified portfolios,” he said.

Supporting this trend, Coinshares data reports bitcoin funds attracted a net $5.5 billion and ether funds $890 million in May.

Trump Media Partners with Crypto.com to Launch ETFs Through Truth.Fi

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Trump Media & Technology Group, the company behind the Truth Social platform, announced on Monday that it has partnered with Crypto.com to launch exchange-traded funds (ETFs) and related products under its Truth.Fi brand. This collaboration is aimed at offering financial products that include both digital assets and traditional securities with a “Made in America” focus.

Following the announcement, Trump Media’s shares rose 10.5% in after-hours trading, though the company’s stock has fallen 38% over the past three months.

The ETFs, which will be available through Crypto.com’s broker-dealer Foris Capital, are expected to include cryptocurrencies like bitcoin and cronos, alongside securities from various industries. These funds are slated for launch later this year and will be offered in the U.S., Europe, and Asia.

Crypto.com will provide key infrastructure, including backend technology, custody services, and cryptocurrency support for the ETFs.

The partnership follows the January launch of Trump Media’s Truth.Fi brand, signaling the company’s expansion into financial services and fintech, particularly in the cryptocurrency space. Trump Media had previously announced plans to invest up to $250 million through Charles Schwab to diversify its cash holdings, which stood at over $700 million at the end of 2024. This new venture includes investments in ETFs, separately managed accounts, and cryptocurrencies.

Trump Media also revealed in February that it has applied for trademarks for several investment products, including the Truth.Fi Bitcoin Plus ETF, Truth.Fi Made in America ETF, and Truth.Fi U.S. Energy Independence ETF, which focus on sectors like bitcoin, U.S. manufacturing, and energy.

Bitcoin’s Bear Market Hits New Investors Hard

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Bitcoin’s recent plunge has left many newcomers feeling the pinch, especially those who entered the market during its peak. The largest cryptocurrency, which soared past $100,000 just weeks after the 2024 U.S. presidential election, has since entered a bear market. As of now, Bitcoin is trading at around $80,000, down nearly 25% from its January high. This sharp decline comes amid a global stock sell-off and concerns about U.S. economic policies.

Many of the newer investors, especially those who purchased Bitcoin at its peak and used borrowed money, are now experiencing significant losses. Over the past three months, approximately 20 million new Bitcoin addresses have been created, making up about 1.5% of all Bitcoin addresses. However, the spent output profit ratio, which indicates the ratio between the prices at which Bitcoin is bought and sold, has dropped to 0.95, the lowest level in over a year. This suggests that many of the recent buyers are already locking in substantial losses.

Bitcoin reached an all-time high of $109,071 in January 2024, but has since lost most of its gains. Analysts point to factors such as concerns about U.S. tariffs, the health of the global economy, and a tech sell-off as reasons for the market’s decline. Analysts like Kevin Dede from H.C. Wainwright also express surprise at the $80,000 price level, with many anticipating further downturns.

In addition to the drop in Bitcoin’s price, traders with leveraged positions are facing severe pain. Bitfinex analysts report that daily realized losses for this group have exceeded $800 million, with some of the largest losses occurring on February 28 and March 4. Moreover, investment products tracking digital assets have experienced consistent outflows for four consecutive weeks, with total assets under management dropping to $142 billion, their lowest since mid-November 2024.

U.S. spot Bitcoin ETFs also saw a massive outflow of about $1.1 billion on February 25, marking the largest single-day outflow since their launch. While past corrections have led to calmer periods, Bitcoin’s future seems linked to broader market conditions. Volatility is at a high, with Bitcoin’s implied volatility spiking to 69% and Ether’s volatility rising to 90%. These numbers suggest that investors are bracing for more turbulence in the near term.

Some experts predict that this downturn may be temporary, similar to the market corrections seen in late 2018, and that Bitcoin may ultimately reach higher highs in the future.