Grayscale Investments has released its 2018 report showing an increase in Bitcoin investment despite the year-long bear market. The New York-based virtual currency asset management firm also said it recorded its largest annual inflow since inception even with a slightly under-performing fourth quarter of 2018.
Filling up on Bitcoin Despite Prolonged Bear Market
- 1 Filling up on Bitcoin Despite Prolonged Bear Market
- 2 Institutional Investors Leading the Way
- 3 Floodgates Have Opened
According to the annual report released by the company on Thursday (February 14, 2019), Bitcoin and cryptocurrency investments dominated the firm’s revenue inflows in Q4 2018. However, despite its clear dominance, the actual investment figures from the BTC and crypt arena shrunk by more than 60 percent on a quarter-by-quarter basis.
Grayscale, a subsidiary of Digital Currency Group (DCG) declared a total investment sum of $359.5 million for all of 2018. According to the document, this figure represents a 400 percent increase from 2017’s numbers and an almost 300 percent growth for all previous four years.
Of this figure, investments into the Grayscale Bitcoin Trust topped $242 million. In the Q4 2018 alone, capital inflows from BTC investors reached 88 percent of the $30.1 million realized during the period. This increase in crypto investment comes even in the midst of a year-long bear market that saw prices plummet downwards by more than 80 percent.
Speaking to Investor’s Business Daily (IBD), Michael Sonnenshein, the Grayscale managing director, said:
“It was by no means our best quarter, but it’s certainly important to recognize that despite the price declines investors were actively engaged.”
Institutional Investors Leading the Way
Concerning investor profile, the company declared that institutional investors dominated inflows, contributing 66 percent. Retirement accounts and accredited individuals accounted for 40 percent and 14 percent respectively. An excerpt from the report that highlights the above trend reads:
“These datapoints reinforce two important trends that we’re observing. First, the average investor at this stage of the bear market is patient with a multi-year investment horizon (i.e., investing for retirement). Second, institutional investors are building core strategic positions in digital assets over time and have largely viewed the 2018 drawdown as an attractive entry point. While the dollar amounts invested declined in Q4, institutional investors share of the ‘new investment pie’ was roughly consistent throughout the year.”
For these institutional investors, BTC remains remains the best option as seen in the figures presented by the company. This trend echoes recent comments made by DCG CEO, Barry Silbert. As reported by Blockonomi on Thursday, Bitcoin is already the de facto king of the cryptocurrency space.
Grayscale says its total asset under management now stands at more than $820 million with its Bitcoin fund still the highest contributor of investment inflow. Such is the established status of the top-ranked cryptocurrency, its passive investment fund continues to top all other virtual currency trusts on the Grayscale investment catalog.
Floodgates Have Opened
The figures published by the company tally with the emerging narrative that institutional interest in BTC is moving well beyond the novelty stage to that of an actual developing trend. Earlier in the week, Morgan Creek Digital announced that two U.S. public pension funds had invested in its $40 million cryptocurrency fund.
The two pension funds, based in Fairfax County, Virginia are the first in the U.S. to invest in a cryptocurrency fund. According to Morgan Creek Digital partner, Anthony Pompliano, an insurance company as well as a university endowment fund are also invested in the $40 million investment vehicle.
Commenting on Grayscale 2018 report, Mati Greenspan, Senior Market Analyst at eToro said that mainstream fund managers are becoming increasingly wiser to the need to diversify into the cryptocurrency investment arena. Tom Lee of Fundstrat in a recent 2019 outlook report to clients identified increased institutional adoption as one of the tailwinds that will drive prices higher in 2019.