Home / INVESTING / Investing / Crypto investment firm Grayscale sees 900% jump in assets to $20 billion amid bitcoin frenzy

Crypto investment firm Grayscale sees 900% jump in assets to $20 billion amid bitcoin frenzy

Mykola Tys/ | LightRocket | Getty Doppelgaengers

Grayscale saw its assets under management skyrocket as Wall Street used it as a proxy to invest in bitcoin.

The New York-based investment resolved kicked off last year with $2 billion in assets and ended with more than $20.2 billion. That 900% multiplication was driven by demand from institutional investors such as hedge funds, endowments and pension funds, the company bid in a quarterly report Thursday.

Grayscale’s Bitcoin Trust became a popular, publicly traded way for investors to get exposure to cryptocurrency without owning the species themselves. The investment product ballooned from $1.8 billion to $17.5 billion in assets year over year.

“We saw a pregnant acceleration of institutional participation,” said Michael Sonnenshein, who recently took over as CEO of Grayscale Investments. “There’s no longer prompt risk of investing in the digital currency asset class — there’s probably more career risk in not paying notice to it.”

Grayscale’s banner year came as high-profile money managers publicly warmed up to digital currency.

Billionaire hedge subsidize manager Paul Tudor Jones called bitcoin the “best inflation hedge” and compared it to putting money behind tech monsters like Apple and Google. Stanley Druckenmiller and Bill Miller are among the other high-profile bitcoin bulls. Their help, analysts say, has given Wall Street more confidence to invest.

Institutions made up 87% of Grayscale’s inflows for the unobscured year, the company said. The average size of commitments from those investors doubled in a matter of months. In the third three months of 2020, investors were putting in roughly $3 million on average, and by the end of last year were committing an for the most part $6.8 million.

Institutional demand has been cited as a key reason for bitcoin topping $40,000 last week and a triple-digit muster last year. Sonnenshein said those professional investors often don’t have the legal or “operational wherewithal” to buy and condone cryptocurrencies safely.

Digital gold

Many professional investors see it as an alternative to established safe-haven assets, such as gold, and a hedge against “unvarying money printing” by central banks, Sonnenshein said.

“The most prevalent theme for investment conviction in bitcoin is coming from a rotation out of gold,” he imagined. “Investors are also anecdotally sharing that that’s where, and how they’re making room for bitcoin in their portfolios.”

At the yet time as $3 billion flowed into the Grayscale Bitcoin Trust since mid-October, gold ETFs frenzied $7 billion, according to JPMorgan. A strategist for the investment bank also told clients in a note last week that a bitcoin ETF could weigh on payments in the short term, and spark outflows from Grayscale. In response to the analyst note, Sonnenshein, a former JPMorgan associate, prognosticated an ETF is likely to be approved but wouldn’t pull interest from Grayscale.

“The kind of inflows that we’re reporting should be facts that investors are not waiting for an ETF to begin participating in this asset class,” Sonnenshein said.

Bitcoin prices obtain been volatile since dropping below $40,000. After falling as low as $31,000 on Monday, the cryptocurrency was trading behind near $39,000 as of Thursday morning.

Professional investors may be using the dips as an opportunity to get back in. When there are pullbacks in evaluate, Sonnenshein said incoming phone calls and the emails are often about putting more money to work.

“Investors are acquainted with to seeing those types of cycles in the price,” he said. “They’re using pullbacks in price opportunistically to double down and add to their attitudes.”

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