Institutional investment is a double-edged sword for the cryptocurrency industry. On the one hand, their pull-out of the market likely caused the recent coronavirus-related crash in Bitcoin’s price. On the other hand, they are flocking to Grayscale’s investment fund, which brought in a record $1 billion USD during Q1 of 2020. GBTC offers a means of investing in Bitcoin without navigating the sharp learning curve of the cryptocurrency space. As such, it often serves as an indicator of sentiment from the general public.
In contrast, Blackrock’s asset management business saw a severe pullback from investors. As the world faces a certain recession – if not a full-blown depression – investors are fleeing from “riskier” options. While crypto-enthusiasts have touted Bitcoin as a safe haven asset in recent years, this may be the first true test of that idea. Unlimited quantitative easing may help buoy stocks in the short term, but savvy investors know it will have serious repercussions long-term.
Grayscale Bitcoin Investment Trust
Grayscale provides a publicly-traded, open-ended grantor trust. While not technically a stock, lacking some of the protections provided for investors, it is available on public markets. As such, it allows less tech-savvy users to benefit from the potential profits of the cryptocurrency industry. However, the publicly advertised price does not always correlate directly with that of Bitcoin. GBTC occasionally trades at a premium or discount, depending on demand.
The recent spike in investment suggest a promising, if lukewarm, reception for the idea of Bitcoin as a store of value. While good news for Bitcoin, this means little for the cryptocurrency space as a whole. These investors remain firmly in the traditional market, with no means of trading between various alt-coins.
Recent Bitcoin Performance
Bitcoin’s recent performance drives much of the current investment frenzy. Despite a sharp crash in March, alongside almost every other asset crash, it recovered 80% within a matter of days. While price action muted in the aftermath, it remains fairly stable compared with other potential investments.
Barring unforeseen circumstances involving the coronavirus, the next big event for Bitcoin will be the upcoming halving. Anticipated for May 12th, the halving will reduce the blockchain’s mining reward from 12.5 BTC to 6.25 BTC. Historically, these events have caused spikes in value. Despite prior post-halving performance, considerable differences in the market may mitigate such a rise.
Article By: Adam Stone