Grayscale sees inflows surge 900% as Wall Street swarms Bitcoin

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Grayscale’s assets under management surged as Wall Street used Grayscale as a proxy to invest in Bitcoin.

A New York-based investment firm started last year with $ 2 billion in assets and ended with more than $ 20.2 billion. The company said in a quarterly report Thursday that the 900% increase was due to demand from institutional investors such as hedge funds, funds and pension funds.

Grayscale Bitcoin Trust has become a popular and listed way for investors to come into contact with cryptocurrencies without owning the coin itself. Investment products have grown from $ 1.8 billion to $ 17.5 billion in assets year-on-year.

“Institutional investor participation has accelerated significantly,” Michael Sonnenshain, who recently became CEO of Grayscale Investments, told CNBC in a telephone interview. “There is no longer any professional risk of investing in a digital currency asset class. Perhaps by not paying attention to it, there is more career risk.”

The year of the grayscale flag came when a prominent money manager publicly warmed up to digital currencies.

Billionaire hedge fund manager Paul Tudor Jones called Bitcoin the “best inflation hedge” and compared it to putting money behind tech giants like Apple and Google. Stanley Drucken Miller and Bill Miller are among the other famous Bitcoin bulls. With their help, Wall Street has become more confident in their investment, analysts said.

According to the company, institutions accounted for 87% of grayscale inflows throughout the year. The average size of commitments from these investors has doubled in a few months. In the third quarter of 2020, investors averaged about $ 3 million and by the end of last year they had spent an average of $ 6.8 million.

Institutional demand is cited as the main reason Bitcoin surpassed $ 40,000 last week and rose three digits last year. Sonnenshein said these professional investors often do not have the legal or “operational means” to securely buy and hold cryptocurrencies.

Digital gold

Many professional investors consider it an alternative to established and safe assets such as gold and a hedge against “permanent money printing” by central banks, Sonnenshain said.

“The most common theme of convictions for investing in Bitcoin comes from rotation from gold,” he said. “Investors also anecdotally share where it is and how it makes room for Bitcoin in its portfolio.”

Gold ETFs lost $ 7 billion as $ 3 billion flowed into the Grayscale Bitcoin Trust from mid-October, according to JP Morgan. Investment banking strategists told clients in a memo last week that Bitcoin ETFs could put pressure on prices in the short term, causing a spill out of grayscale. In response to former JP Morgan Associate Analyst Note Sonnenshein, he said ETFs are likely to be approved, but will not draw attention from Grayscale.

“The kind of inflow we’re reporting should be evidence that investors aren’t waiting for ETFs to start joining this asset class,” Sonnnshein said.

Bitcoin prices have fluctuated since falling below $ 40,000.Cryptocurrencies were trading near $ 39,000 as of Thursday morning after falling to $ 31,000 on Monday..

Professional investors may be using it as an opportunity to get their dips back. When prices fall, Sonnenshein said incoming calls and emails are often about spending more on work.

“Investors are accustomed to seeing these types of cycles of price,” he said. “They are opportunistically taking advantage of price pullbacks to double and increase their positions.”

Grayscale sees inflows surge 900% as Wall Street swarms Bitcoin

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