Grayscale’s “Heaviest Quarterly” Inflows in Q3 during Bitcoin Slump Proof of Substantial Progress on Institutional Front


  • Institutional investors facing challenges but true crypto believers emerging
  • A digital asset strategy is either getting started or already underway
  • Grayscale Investment has a strange temporary monopoly on the U.S. crypto ETF market – Messari

In 2019, several institutions like Bakkt, Fidelity, and TD Ameritrade, started to invest in the crypto space. However, only a handful have made it and that has people wondering “when will the herd actually come?”

Vision Hill Group, an investment consulting and digital asset management firm says in its latest blog, the “reality” is institutional investors are still learning and trying to get comfortable, a process that will take time.

Despite there being educational progress through 2019, there have been three key questions asked by institutions, though blockchain technology is transformational, is it too early to be investing in this space? When is mainstream adoption going to occur? And when will bitcoin no longer be the entire story?

Though institutions are facing the challenge of structural complexity, time constraints, and agency challenge, true crypto believers in these large organizations are “emerging.” As such, it believes the process for forming a digital asset strategy is either getting started or already underway.

“We believe substantial progress has been made on the institutional investor front, even if the pace of funding has been relatively slower than many would like.”

DCG’s Grayscale Investments sits in a unique position

Interestingly, in Q3 2019, the Grayscale Bitcoin Trust experienced the “heaviest quarterly” inflows at $171.1 million in its six-year history. This has been while Bitcoin price lost about 23% of its value during the same period.

Across Grayscale’s platform, in Q3 dollar-denominated inflows hit the highest level ever, up 200% quarter-over-quarter from 2Q 2019.

Recently, Michael Sonnenshein, managing director at Grayscale Investments shared, “We’re seeing now a real institutionalization of the digital currency asset class, as well as a lot of infrastructure being built around digital assets like bitcoin.”

He also pointed out how regulators are weighing in on digital currencies and ensuring that the right investor protections are in place. Not to mention, legacy financial institutions like Fidelity are launching crypto-related products. All of these, he said, are the signals that are “super exciting for the investment community.”

Messari in its Crypto Thesis for 2020 also talked about how Digital Currency Groups’ Grayscale investments “sits in a unique regulatory position as an asset manager.”

It explains how its structure allows institutional investors to create new shares in the test and flip them after a year at a huge public market premium. Then, they recycle their gains post-tax at a higher cost basis.

“They essentially have a strange temporary monopoly on the U.S. crypto ETF market, where their “sidedoor ETFs” allow them to add AUM to the trust that essentially can never exit.”

Moreover, it notes that DCG is also “one of the best positioned U.S. crypto unicorns to access the public markets via an IPO.”

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