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Institutions Bet on Bitcoin Despite Year-Long Bear Market, Grayscale’s Report Reveals

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by Darya Rudz · 3 min read
Institutions Bet on Bitcoin Despite Year-Long Bear Market, Grayscale’s Report Reveals
Photo: QuoteInspector

Grayscale revealed that Bitcoin products were invested in most, with 66 percent of inflows received from institutional investors.

Grayscale Investments, New York-based company that specializes in digital asset management, has published the 2018 annual report that demonstrates an increase in Bitcoin investment despite the long-lasting bear market.

According to the data provided by Grayscale Investments, for the fourth quarter of 2018, the company contrived to attract a total of $30.1 million, with the average weekly investment making up $2.3 million. A total investment sum for the whole 2018 accounted for $359.5 million, which is a 400 percent increase from 2017’s results and an almost 300 percent growth for all previous four years.

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.”

It is notable that Bitcoin products were invested in most. In the Q4 2018 alone, capital inflows from Bitcoin investors reached 88 percent of the $30.1 million realized during the period. Only 12 percent were into products tied to other digital assets.

The report reads:

“In the fourth quarter, 88% of inflows were into Grayscale Bitcoin Trust, while 12% were into products tied to other digital assets.”

Of the last weekend, $2 Million went to Grayscale Bitcoin Trust and $0.3 Million went towards other investment products based on such digital assets as Bitcoin Cash (BCH), Ethereum (ETH), Litecoin (LTC), Stellar (XLM), XRP and ZCash (ZEC).

Such a result comes even in terms of a year-long bear market that made prices decrease by more than 80 percent.

The company has also drawn attention to the role of institutional investors in such inflows. According to the report, institutional investors contributed 66 percent of inflows. Retirement accounts and accredited individuals accounted for 40 percent and 14 percent accordingly.

The report 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 those investors, Bitcoin is the best and most trusted asset to put money in. The Grayscale team is not surprised by this Bitcoin’s dominance. Barry Silbert, the founder of Grayscale, said:

“Bitcoin has the potential to radically transform our concepts of money, store of value, and the means by which assets are exchanged the world over.”

Cryptos As a Long-Term Investment for Institutions

Commenting on Grayscale 2018 report, Senior Market Analyst at eToro Mati Greenspan said that institutional investors are becoming aware of the necessity to diversify into the crypto industry.

Recently, Boston-based Cambridge Associates, an institutional investor consultancy firm, stated that despite all the challenges faced by cryptos, investors should explore this industry, as cryptos can be a long-term and profitable investment.

The firm said:

“Despite the challenges, we believe that it is worthwhile for investors to begin exploring this area today with an eye toward the long term. Though these investments entail a high degree of risk, some may very well upend the digital world.’’

The advice has been supported by former Goldman Sachs partner and founder of crypto merchant bank Galaxy Digital Mike Novogratz who has always been a vocal Bitcoin proponent. Earlier, he predicted that the crypto industry will undergo a structural shift from “a people’s revolution to an institution-led one” and advised all macro funds to hold at least a small percentage in Bitcoin.

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