Grayscale Now Holds 1.7% of All Bitcoin; Reports Record Growth in Q1 2020


In Q1 2020, which was characterized by significant volatility, Grayscale Investments saw continued demand and that too at a “record pace.” This is because “investors are tactically using drawdowns to increase their exposure to the asset class, even in a “risk-off” environment.”

Strong and sustained interest in Crypto

The new decade had a turbulent start with coronavirus pandemic induced sell-off triggering a huge drawdown in nearly all risk assets and currencies. But despite the drawdown this quarter, Grayscale continues to hit all-time highs.

For the first time, the inflows into Grayscale products over a 12-month period surpassed $1 billion, “showing strong and sustained evidence that investors are increasing their digital asset exposure at current levels.”

The digital currency manager which has over $2.2 billion in assets under management as of March 31, 2020, had its largest quarterly rise of $503.7 million in 1Q20 in its history.

Both its Bitcoin Trust and Ethereum Trust saw record quarterly inflows of $388.9 million and $110.0 million, respectively. The demand for Grayscale Products ex Bitcoin Trust also grew a whopping over 260% from last quarter.

Not just the assets under management but Grayscale’s market share also spiked to a new high.

“Grayscale's ten funds now hold 1.2% of ALL crypto in circulation and 1.7% of bitcoin in the world,” said Barry Silber, founder, and CEO of Digital Currency Group, the parent company of Grayscale.

Source: Grayscale Q1 2020 Investment Highlights

Grayscale investors are seeing digital assets as a medium to long-term investment opportunity and using the drop in price as the way to do so at the fastest pace in its history.

Most of the company's investors allocate into Bitcoin via Grayscale Bitcoin trust or Grayscale Digital Large Cap Fund that accounts for 80% of Bitcoin. However, now 38% of investors, up from 29% in 1Q19, have invested in multiple Grayscale products.

Other cryptos covered are Bitcoin Cash (BCH), Ethereum (ETH), Ethereum Classic (ETC), XRP, Stellar Lumens (XLM), Litecoin (LTC), Zcash (ZEC), and Horizen.

This demand for Grayscale Products is primarily from institutional investors at 88%. These investors are dominated by hedge funds, registering a jump of 9% from the past 12 months. New investors meanwhile accounted for $160.1 million in inflows.

Source: Grayscale Q1 2020 Investment Highlights

The new investment capital this time was more heavily weighted to offshore investors than the rough split between the U.S. and offshore investors.

Now, large capital inflows can be taken as a sign of perceived value and “potential future price momentum.” Grayscale also found that “large increases in dollar-denominated inflows relative to Grayscale AUM have historically preceded market rallies.”

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