Grayscale Trust Reports Record Investments In 2020, Institutions Diversifying Crypto Portfolios

Grayscale has recorded a record high level of investments in the second quarter of 2020, according to a recently released report.

Total investment in the trust landed at $905.8 million with 84% coming from institutional investors, a market which some believe is crucial to win over to push crypto into the mainstream. Grayscale Trust is often used as a barometer for institutional interest in crypto. Confidence that institutions would embrace crypto took a hit in June when the price of Grayscale’s trust dropped 50% after a 12-month lockup period expired and investors began liquidating their holdings. A report from Goldman Sachs arguing that cryptocurrencies are not an asset class in May also garnered widespread attention as the crypto community tried to gage if traditional finance would ever embrace crypto. However, this new metric restores some hope that cryptocurrencies may not be fringe finance for much longer.

PC: Grayscale “Assets Under Management,” a broad reflection of investment interest in digital currencies.

Unsurprisingly Bitcoin led the pack of investments with 82.92% of investments for the quarter going to Grayscale Bitcoin Trust. However, the report noted that investments Ethereum, Litecoin, and Bitcoin Cash were all on the rise with Litecoin seeing its largest inflows to date and Bitcoin Cash reporting the largest inflows since the second quarter of 2018. Investment in Ethereum was also up to 15% of total inflows for all Grayscale products, the highest percentage to date. The report added that 81% of returning institutional investors have invested in multiple cryptocurrencies.

New investors represented 57% of the Grayscale investor base in 2020, which is an increase from the 12 month average of 49%.

Inflows into Grayscale’s Bitcoin Trust were also proportional to 70% of all Bitcoin mined over the quarter. The proportion jumped up to 118% after Bitcoin’s halving in May.

PC: Grayscale

“After Bitcoin’s halving in May, 2Q20 inflows into Grayscale Bitcoin Trust surpassed the number of newly-mined Bitcoin over the same period,” the report stated. “With so much inflow to Grayscale Bitcoin Trust relative to newly-mined Bitcoin, there is a significant reduction in supply-side pressure, which may be a positive sign for Bitcoin price appreciation.”

The report warned that companies investing could only demonstrate supply and demand in the market and do not provide insight into where the mined Bitcoin is going.

By Emily Mason



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