Grayscale Investments recently reported a considerable spike in interest in cryptocurrency trusts from hedge funds as well as myriad other institutional investors. In total, Grayscale has nearly $4 billion in holdings, $1.7 billion of which is invested in cryptocurrency. The majority of the buying is the result of interest from institutional investors looking for crypto exposure by way of pension plans and 401k plans.
Even traditional hedge funds are hopping on board the crypto wagon. Bitcoin and other cryptocurrencies are now viewed as a means of hedging risk against the government’s monetary stimulus that will inevitably lead to inflation.
The Money is Moving Toward Cryptocurrency
Grayscale Investment’s director of investor relations, Ray Sharif-Askary, states the average weekly investment in the group’s crypto trusts has soared more than 800% across the year, a considerable increase from the $3.2 million on a weekly basis in ’19. At the moment, the firm is receiving an infusion of $30 million on a weekly basis in ’20.
Why has Interest in Crypto Spiked Throughout the Investment Community?
Sharif-Askary indicates this year has been unique due to the federal government’s printing of money in response to the coronavirus pandemic along with macroeconomic instability. Institutions seek hedges and potential safe havens such as Bitcoin to offset the risk of inflation and an unpredictable economy. As a result, crypto funds such as those managed by Grayscale Investments have enjoyed record quarters. Sharif-Askary reports nearly half of the clients that stem from institutions are multi-strategy hedge funds. However, a considerable amount of the new crypto holders stem from short and long hedge funds.
Bitcoin and Crypto are now a Part of 401ks
If one were to have predicted 401k plans would hold cryptocurrency back in 2010, most people would have scoffed at the notion. However, this is now our reality. In fact, the trend of moving 401k funds toward crypto began in 2013. The bottom line is investors, including everyday people with a 401k, are seeking exposure to digital assets that do not require buying and storing them on their own.
In short, people are looking for groups such as Grayscale to acquire and store Bitcoin on their behalf. Grayscale clients are now diversified into Bitcoin, Ethereum and other altcoins. In fact, nearly 40% of Grayscale clients hold a cryptocurrency aside from Bitcoin.
The increasing society-wide acceptance of cryptocurrency will undoubtedly steer that many more people toward gambling with crypto on the internet. After all, investing in cryptocurrency is not that much different than gambling with it.
Grayscale’s Interest in Ethereum
Grayscale’s digital asset managers have purchased one out of every two recently mined Ethereum in 2020. This is quite the investment on behalf of the group’s clients yet it should not come as a surprise to those who study economics. Investors are flocking to supposed safe havens including scarce assets in the midst of the coronavirus outbreak. It won’t be long until the American dollar begins to inflate as a result of the federal government’s stimulus. This means that much more money will likely move to Bitcoin and other cryptocurrencies in the months and possibly years ahead.