It goes without saying that 2018 hasn’t treated the crypto market all too well. The value of all altcoins, along with Bitcoin, have collectively fallen by over 70%, with retail trading volume falling by a similar figure. However, as is the common theme with markets of any size, there’s a definite silver lining in the abstract cryptocurrency cloud.
This silver lining, as predicted by a number of industry pundits, is the fact that institutional players have continued to allocate capital to crypto-related instruments en-masse.
Bitcoin Bear Market Hasn’t Deterred Grayscale’s Clients
In Grayscale Investments’ most recent volume of its quad-annual “Digital Asset Investment Report” series, the startup revealed that its digital asset operations haven’t been forestalled by Bitcoin’s most recent collapse. Per the report, Grayscale, a subsidiary of New York-based Digital Currency Group, saw its clients invest $81.1 million in Q3, bringing the firm’s year-to-date total to a jaw-dropping $330 million. Reportedly, 59% of that capital ($195 million) has come from the pockets of hedge funds, pensions, endowments, family offices, and other institutional investors.
Although $330 million may seem measly on the scale of the cryptocurrency market at large, which sits at a casual $200 billion valuation, this figure represents a 1300% increase in Grayscale’s business year-on-year. This, of course, is a testament to the growing involvement of institutions in this market, as just one year ago, the investment startup “only” raked in $25.4 million.
Cementing its legitimacy further, CNBC has revealed that Grayscale, a self-proclaimed “leader of digital currency investing,” now manages over $1.5 billion in assets, representing a respectable portion of this industry’s swelling monetary influence.
Out of the $330 million invested through Grayscale’s diverse roster of vehicles, in the aforementioned document, the firm revealed that it saw 73% of funds flow through its Bitcoin Investment Trust (GBTC), subsequently noting that BTC “is still king” after its decade-long run.
Interestingly, GBTC, which is publicly tradable on America’s stock market, saw its historical premium fall substantially, crypto savant Eric Thies pointing out that “retail investor interest is extremely low and something/someone very powerful is holding actual BTC up.”
Grayscale’s Sonnenschein: Institutions Are Accumulating Crypto
Commenting on the statistics, Michael Sonnenschein of Grayscale Investments, who Business Insider calls one of “October’s rising Wall Street stars,” took to CNBC Fast Money’s panel, who hasn’t shirked away from covering the cryptosphere’s going-ons in the past.
Speaking on institutional involvement in this nascent asset class, Sonnenschein, a former associate of J.P. Morgan, claimed that a majority of Grayscale’s clients are “using this price pullback” to either dollar-average-down or enter into crypto positions.
The Grayscale managing director noted that there is an “even mix” between the number of institutions doubling-down on their cryptocurrency holdings and those that have forayed into this asset class for the first time. Sonnenschein added:
“There have certainly been folks involved pre 2017’s run-up and there have definitely been others that were [enticed into the asset class] by the run-up, who may now be stepping into this space when prices are more attractive.”
Despite the clarification, the Fast Money panel remained somewhat puzzled, with host Melissa Lee posing the following question (non-verbatim) — which group of investors is still interested in crypto today?
Responding on behalf of Grayscale, Sonnenschein pointed out that his firm’s clients are “[institutions] that have 10+ year track records of success and deep investment committees and convictions,” indicating that the “institutional FOMO” that Mike Novogratz once referred to could be just around the corner.