Institutional investment is on the rise, says Grayscale

By Adriana Hamacher

New York-based crypto-fund manager Grayscale reported yesterday that its assets under management have tripled from $926 million to $2.7 billion over the last three months. Though that’s still shy of its 2017 high of $3.5 billion, Grayscale says its healthy Q2 growth was due to the resurgence of the digital asset market.

The fund manager reported that institutional investors now comprise 84% of all demand, up from 73% in Q1 2019; that’s despite its flagship fund, the Grayscale Bitcoin Trust, being closed to new funds during the last two months.

“Inflows nearly doubled quarter-over-quarter, from $42.7 to $84.8 million, demonstrating that the recent rally in digital asset prices is supported by fresh investment,” Grayscale reported, adding that its alternative investment products—such as the Grayscale Ethereum Trust —contributed 24% of the total fresh capital inflow. 

Grayscale recently made its Ethereum Trust available for trading in over the counter markets. It allows investors to invest in Ether without holding the underlying asset, a factor which is likely to be attractive to institutions, who can then dispense with the challenges of buying, storing and safekeeping the cryptocurrency. 

Grayscale, which manages 10 crypto-based investment products, is spearheaded by Barry Silbert, CEO of crypto focused VC’s Digital Currency Group. It’s not alone in noting an uptick in institutional investment. BCB, a UK-based financial services group, specialising in digital assets, also reported a boost in institutional investment this year.

Meanwhile, Visa has invested $40 million in Anchorage, a startup that secures cryptocurrency holdings for institutional investors.

But CZ, CEO of the world’s biggest crypto exchange by volume, Binance, told Bloomberg, last week, that “the number of institutions coming into this industry has not increased that tremendously in 2019 yet.”

According to CZ, retail investors still account for about 60% of trading volume on his exchange, which is similar to last year. 

Institutional investment has long been seen as a highway to widespread adoption. As a consequence, the original crypto, bitcoin, has evolved the likes of utility and security tokens, stablecoins and IEOs—all in an effort to appeal to the sensitivities of the elusive institutional investor and provide a bridge to conventional finance.

Now companies like Facebook, JP Morgan, Fidelity, MetLife, and IBM are continuing to build that bridge by making significant investments in blockchain initiatives.

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