As crypto investors move to bitcoin, Grayscale CEO shrugs off rough May

The crypto market has rebounded since its crash earlier this month, and investors sticking with the asset class are rotating back into Bitcoin (BTC-USD) and other major cryptocurrencies like Ethereum (ETH-USD) and Cardano (ADA-USD).

Coupled with selling pressure seen in equities and bonds in addition to the collapse of Terra’s (UST-USD) algorithmic stablecoin, investors sold approximately $640 billion in crypto assets or more than 35% of the asset class’ total value between May 4 and May 12.

For crypto, the volatility is nothing new, Grayscale CEO Michael Sonnenshein told Yahoo Finance on the sidelines of the World Economic Forum last week.

“The recent selloff… from what we're hearing from investors, has not deterred them. If anything, they're looking at it opportunistically,” said Sonnenshein, whose crypto-focused investment trust has seen its assets shrink by more than half since the start of the year.

Currently trading above $31,500 per coin as of Tuesday at noon, Bitcoin has seen 9.23% uptick in the last five days. For the past several weeks, investors' preference for the asset has also risen sharply. From May 10 to May 31, Bitcoin’s market capitalization relative to the total crypto asset class has jumped almost 6%, a swift sign investors are seeking less crypto-risk.

Bitcoin now makes up almost 47% of crypto’s value, according to TradingView. That’s its highest point since October 2021. Since April 2021, Bitcoin’s value relative to the crypto market has remained below 50%.

Despite finishing down more than 16% from where it stood on May 1, Bitcoin “has still outperformed most of the crypto market,” a Monday note from Arcane Research pointed out.

Relative to stock indexes, the largest cryptocurrency is still bearing significantly greater losses. As of Tuesday around noon, Bitcoin has lost more than 33.6% of its value year to date, far worse than the S&P 500 (-13.44%) and Nasdaq (-23.27%) for the same period.

But as Sonnenshein and a recent report from RBC point out, such a drop isn’t uncommon for the asset. According to the report, Bitcoin sat in at least a 20% drawdown or more “for nearly 80% of its history.”

Created in the wake of the 2007-2009 financial recession, Bitcoin was initially intended to be used as electronic cash. Through the years, many of its proponents have adjusted that view, with the majority opinion viewing it as a store of value asset — essentially “digital gold.”

Since trading for less than one cent a little more than 10 years ago, the coin’s value has risen substantially since the pandemic. However, its investing use case for portfolio diversification has also waned in the near-term as its correlation to other risky assets continues.

Data from Coinmetrics shows that while Bitcoin’s 30-day correlation to the S&P 500 has dropped through May’s selling period, it still rests above its highest point since March 2020.

“A lot of people criticize it for not becoming an overall currency, to go buy a cappuccino, to pay your rent, things like that. But if Bitcoin is successful — and it largely is very successful already — there's nothing wrong with its solo use case being as a digital gold, a gold 2.0, a gold for a new and younger generation,” Grayscale’s Sonnenshein added.

Other major cryptocurrencies seeing investor interest include Ether and Cardano.

Ether trades at $1,936, a more than 48% drop year-to-date but an 8% improvement in the last five days. Meanwhile, Cardano’s native crypto, ADA, is showing the greatest gain of larger cryptocurrencies by market capitalization. It's currently changing hands above 61 cents, a more than 25% increase from where it stood five days ago.

David Hollerith covers cryptocurrency for Yahoo Finance. Follow him @dshollers.

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