Bitcoin prices continue to trade mostly in a sideways trend, as retail demand has declined over the course of 2018. However, institutional investors seem to be gaining interest in cryptocurrency and led the world’s largest digital currency asset management firm to record inflows in 2018.
Grayscale, which is a subsidiary of Digital Currency Group, raised $81.1 million in new funds during Q3, per a recent company investment report. This represents a 33% increase from the previous quarter, which brings the total inflows for this year to $330 million. This is the strongest YTD total since its inception five years ago. In November 2017, the company raised $25.4 million in comparison. Grayscale presently has $1.5 billion in customer assets.
Grayscale Seeing Increasing Demand From Institutional Investors
Michael Sonnenshein, managing director at Grayscale told CNBC that Bitcoin’s falling prices haven’t deterred existing clients from investing into digital currency. He stated that assets flows have been strong, despite price declines.
Most of these investments were made by institutional investors like hedge funds, endowments, hedge funds, and other professional investors. Grayscale presently has nine cryptocurrency products. Most of Grayscales clients are high net worth individuals or family offices.
Grayscale analysts believe that despite the rise of altcoins like Ripple (XRP) and others, Bitcoin is still the “king” of cryptocurrency for investors.
Around 73% of inflows were into the Grayscale’s flagship fund, the Bitcoin Investment Trust (OTCQX: GBTC) during the third quarter. Although Bitcoin is the main currency, it’s trading around $6,300, which represents a 55% decrease from its 2017 highs, according to CoinDesk.
Sonnenshein, a former J.P. Morgan associate, said the lower price has been good for those wanting to purchase Bitcoin. Some investors have been waiting for this moment since the its climb to $20,000 last December.
Some investors see this slump as an opportunity to diversify. This event could help Grayscale obtain more relationships.
Institutions are more interested in cryptocurrency and also understand it more conceptually than in years passed. Grayscale doesn’t just teach the basics of Bitcoin during meetings. Current conversations focus on allocation strategies, scaling, transaction growth, and a more in-depth discussion of the cryptocurrency industry.
Grayscale saw a slight deceleration of investments corresponding with the “summer slowdown.” The Grayscale Bitcoin Investment Trust, or GBTC, has typically traded above Bitcoin and is down roughly 70 percent this year.
Institutions generally didn’t invest in cryptocurrencies or ICOs (initial coin offerings) during the hype of 2017. Some reasons for this include lack of security, fraud, and regulatory uncertainty. Despite this, cautious investors are becoming more open to this new industry.
David Swensen, Yale’s chief investment officer, invested in at least two venture capital funds that deal with cryptocurrency and blockchain technology. Blockchain is the underlying technology behind the coins and is increasingly seen as highly disruptive. This is a bullish sign for the cryptocurrency industry, as popular Wall Street firms like Fidelity and Nasdaq, enter the market with many cryptocurrency products.
Article By: Donald Brewster