Reports from the past week indicate unmistakable signals that institutional investors are taking advantage of the coronavirus-triggered market turbulence to increase their exposure to cryptocurrencies.
Grayscale, the world’s largest bitcoin investment trust, last week published its Q1 Digital Asset Investment Report. In a span of three months, the New York-based firm notched record inflows, raising a total of $503.7m – an uptick of nearly double the previous quarterly high of $254.8m.
Of those inflows, 88% were from institutional investors and digging deeper, Grayscale quipped that the lion’s share of these institutional clients were hedge funds. According to the asset manager, even with the cryptocurrency markets freefalling in March, demand for crypto investments remains high. Impressively, its ten funds now hold 1.2% of all crypto in circulation and 1.7% of Bitcoin in the world.
Grayscale Bitcoin Trust (GBTC), which enables accredited investors to gain exposure to bitcoin exclusively, continued to lead investment demand for the firm, with record inflows exceeding $388m. Its Ethereum Trust also reached record levels this quarter, with investors injecting $110m.
Dmitry Tokarev, CEO at Copper, commented: “Zooming out, Grayscale’s data suggests that even in a risk-off climate, its clients have increased their digital asset exposure. Most likely, this is in preparation of a block halving rally given that Bitcoin’s halving is now less than a month away. The Ethereum 2.0 launch, also only around the corner now, is too associated with a bull run.”
The renewed allure of crypto comes as the US Federal Reserve and other central banks around the world work through quantitative easing programs to keep financial markets and the economy afloat.
Traditional asset managers are also having a tough time. BlackRock, the world’s largest asset supervisor and a key partner in the US government’s effort to support its economy, announced in its first-quarter earnings report that institutional investors withdrew about $31 billion from its mutual funds and exchange-traded funds during the first three months of the year. On March 31, the firm’s assets under management (AUM) totaled $6.47 trillion, down 12.9% compared to the prior quarter.
Elsewhere, the CME reported a significant boost of institutional investments in Bitcoin futures this week. According to Coindesk, open interest spiked to $181 million, a 70% increase from the $106 million clocked on March 22. The news comes as Renaissance Technologies' flagship hedge fund, Medallion, is reportedly eyeing the bitcoin futures market, according to a regulatory form filed last month.
Other bullish news for the crypto landscape include reports that Silicon Valley venture capital giant, Andreessen Horowitz, is set to launch a second crypto-focused fund, targeting a close of $450m for crypto projects. And most recently, Bloomberg announced that asset manager Venture Smart Asia is launching Hong Kong’s first approved cryptocurrency fund with a target first-year size of $100 million, offering an officially sanctioned window for institutional investors in Bitcoin.
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