Here’s why crypto funds are seeing massive inflows of institutional money 🚨 This article is 4 years old...
Here’s why crypto funds are seeing massive inflows of institutional money
2 min read
Updated: Apr. 19, 2020 at 8:36 am UTC
Cover art/illustration via CryptoSlate. Image includes combined content which may include AI-generated content.
Q1 2020 was a record quarter for Grayscale Investment Products, with their crypto funds seeing an unprecedented influx of new capital, suggesting that institutional traders are increasing their exposure to digital assets at a rapid rate.
According to this data, the vast majority of this capital came from institutional investors while only a small portion of it stemmed from retail traders.
In addition to the past few months being highly positive for the fundamental growth of the crypto market’s investor composition, it also comes close on the heels of a positive 2019.
Grayscale: Investors flocking to crypto market at extraordinary rates
According to Grayscale’s quarterly report that was released earlier today, fiat inflows into their various crypto investment trusts totaled at over $500 million in Q1 of this year.
The magnitude of this number is elucidated by the fact that inflows into their products throughout all of 2019 totaled at just over $1 billion, signaling that the macro landscape in 2020 has made Bitcoin and other digital assets more attractive to investors.
Frank Chaparro – a blockchain journalist at The Block – summarized the key takeaways from the report in a recent tweet, referencing a chart from Grayscale showing just how massive this recent inflow was compared to that seen in years past.
“Grayscale’s quarterly report has just hit the wire: – Inflows into its various cryptocurrency funds soared to an all-time high of $503.7 million. – More than $1 billion was raised in last 12 months. – 88% of investors were institutions.”
Following Q1, the total cumulative interest across Grayscale’s swath of investment products has reached $1.68 billion.
These two factors could have driven this massive growth
There are two primary factors that possibly played into this massive increase in the number of institutional investors with exposure to cryptocurrencies like Bitcoin.
The first potential factor is the bullish price action seen throughout the first couple of months in 2020.
This uptrend – which led Bitcoin to push from the upper-$6,000 region to highs of $10,500 in under a two-month period – sparked a sense of “fomo” amongst retail investors, which even showed some signs of turning into a 2017-esque frenzy.
This rally came to a bitter end in late-February, however, with the subsequent downtrend being further perpetuated throughout early March.
By this time, however, the first quarter was already nearing its end and all of the retail and institutional investors that fomo’d into the market during the earlier part of the quarter were trapped.
The inflow of institutional capital could have also been driven by fears regarding the turbulence seen in the global economy, with these investors turning to “hard assets” like crypto in an effort to hedge their portfolios.
Regardless of what drove this institutional adoption, it does seem to have left the crypto market in a better fundamental position today than where it was in late-2019.
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Grayscale Investments
Established in 2013 by Digital Currency Group, Grayscale Investments is a trusted authority on digital currency investing and cryptocurrency asset management.