NEW YORK, March 14 (Reuters) – Global investors are taking stakes in cryptocurrency funds and companies as they seek exposure to a sector that many believe could weather the fallout from the conflict Russian-Ukrainian.

Research firm Fundstrat, in its latest note to clients, said that venture capital (VC) buyers invested around $4 billion in the crypto space in the last three weeks of February. VCs paid an additional $400 million to startups in the sector last week, the data shows.

Venture capital investment is in line with broad weekly inflows. Year-to-date, weekly investment in the industry has averaged between $800 million and around $2 billion, according to data from Fundstrat.

New crypto funds also raised nearly $3 billion in the past two weeks as of Friday, the most so far this year.

“The conflict in Ukraine has militarized our financial and digital economy and has really accelerated blockchain adoption,” said Paul Hsu, founder and CEO of Decasonic, a $50 million hybrid fund investing in both digital assets and venture capital. He added that there was a demand for up to $200 million to invest in his fund.

“We are seeing a reallocation towards crypto and blockchain away from real estate and bond funds, for example, due to higher interest rates. I have seen this with my funds but unfortunately because I am closed I cannot admit more funds or investors,” Hsu said.

Data from Refinitiv Lipper showed US investors withdrew $7.8 billion net from bond funds in the week to March 9. read more

Real estate funds posted net outflows of $707 million in the same period, after posting outflows worth $1.15 billion the previous week. Read more

“Native crypto companies are still rising at very high valuations and many funding rounds are still oversubscribed,” said George Melka, managing director of crypto broker SFOX. “In fact, valuations for crypto startups are probably the highest I’ve seen.”

Bain Capital Ventures, a unit of private equity firm Bain Capital, for example, announced early last week that it was launching a $560 million fund focused exclusively on crypto-related investments.

Crypto assets have outperformed traditional risk assets such as stocks during the crisis. Bitcoin rose 12.2% last month, while ether gained 8.8%. Since bottoming out on February 24, when Russia invaded Ukraine, digital currencies have gained 14.5% and 13.5% respectively, while the S&P; 500 (.SPX) has risen just 3.2 %.

CAPITAL INFLOWS, HEDGE FUND RETURNS

Crypto investment products and funds saw $163 million in new institutional inflows in the two weeks to March 4, while inflows into blockchain stocks totaled around $15.6 million, according to data from asset manager CoinShares.

Inflows of $127 million were the largest seen so far this year. Flows to the crypto sector turned positive in late January, after five straight weeks of outflows, according to data from CoinShares.

Crypto fund returns have stabilized.

BarclayHedge’s index of cryptocurrency traders fell 1.5% for the month of February, data showed on Monday, with 39 funds reporting, or about 43% of the total crypto asset managers it tracks. . In January the index fell almost 13% and in December it fell 10%.

“There’s really no panic even with the Ukraine conflict,” said Joe DiPasquale, managing director of BitBull Capital, which manages a crypto fund of funds and two hedge funds.

Both of BitBull’s hedge funds, which employ market-neutral strategies, were up on the year, DiPasquale said, benefiting from bitcoin and ether’s rally in February.

“People are creating funds, encouraged by price appreciation over the past two years,” he said.

Reporting by Gertrude Chavez-Dreyfuss; Editing by Alden Bentley and Nick Zieminski

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