Crypto Funds Hit Record $167 Billion as Investors Hedge with Bitcoin

Global crypto investment funds surged to a record $167 billion in May, as investors increasingly used bitcoin to hedge against market volatility and diversify away from traditional U.S.-based assets. This marks the highest inflow since December, driven by renewed risk appetite and loosening global trade tensions.

Record Inflows Signal Institutional Confidence

According to Morningstar data tracking 294 crypto funds, net inflows reached $7.05 billion in May. The growth is largely attributed to shifting investor strategies amid macroeconomic uncertainty, and reflects a broader institutional acceptance of digital assets like bitcoin and ether.

Nicolas Lin, CEO of fintech firm Aether Holdings, noted the evolving role of bitcoin in diversified portfolios.

Bitcoin is starting to come into its own again not just as a high-volatility asset, but as a hedge that more investors are relying on.

Nicolas Lin

Bitcoin Outperforms Traditional Assets

Over the past three months, bitcoin has gained more than 15%, significantly outperforming gold’s 13.3% increase and the MSCI World Index’s 3.6% rise. The digital asset’s appeal lies not only in its potential for appreciation but also in its growing reputation as a counterbalance to inflation and weakening fiat currencies.

Nic Puckri, analyst and founder of Coin Bureau, believes this trend reflects a larger sentiment shift.

The greenback is projected to keep plummeting, bond yields are rising, and there's uncertainty about the equity markets. But bitcoin seems to be holding strong.

Nic Puckri

ETF Approvals Spark New Wave of Interest

Bitcoin’s rise is also supported by increased institutional interest following the U.S. approval of spot bitcoin and ether exchange-traded funds (ETFs). These products have helped legitimize crypto investing in traditional finance circles, opening access for large-scale asset managers and retail investors alike.

While crypto funds gained momentum, traditional asset classes saw notable outflows. Lipper data shows that global equity funds experienced a net outflow of $5.9 billion in May. Gold funds also posted their first outflow in 15 months, totaling $678 million signaling a major portfolio reallocation among investors.

The Future of Crypto in Portfolio Diversification

Despite the explosive growth following ETF launches, experts say the next phase of inflows will be more measured but sustained. Lin believes the current momentum represents a structural shift in how investors build resilient, diversified portfolios.

I think flows will stay strong, but probably more steady than the rush we saw after the ETFs launched. What’s happening now is more important it’s the start of crypto becoming a permanent fixture in diversified portfolios.

Nicolas Lin

Data from CoinShares revealed that bitcoin-specific funds attracted $5.5 billion in net inflows during May, while ether funds brought in an additional $890 million reinforcing the view that digital assets are no longer on the fringe of global investing strategies.