The numbers are in: Grayscale Investments, a cryptocurrency investment firm, saw a record level of institutional investment in its Bitcoin and altcoin products in 2019, boding well for the market.
This comes in spite of continued assertions that Bitcoin is a “scam.”
For instance, LendingTree Chief Economist Tendayi Kapfidze told Yahoo Finance in a recent interview that he thinks Bitcoin is a “pyramid scheme,” citing his sentiment that you can “only make money [with BTC] based on people who enter after you.”
He added that Bitcoin “has no real utility in the world. They’ve been trying to create a utility for it for ten years now. It’s a solution in search of a problem and it still hasn’t found a problem to solve.”
Investment Firm Reports Massive Institutional Inflows Into Bitcoin
On January 16th, Grayscale released its “2019 Digital Asset Investment Report.”
Per the report, which summed up the performance of the company’s funds and other investment vehicles in 2019, the company raised $607.7 million worth of investment last year. This figure is more than the company brought in all the way from 2013 to 2018.
The report, while filled with other tidbits of data, has seemingly two trends to tell.
Firstly, investors still largely prefer market leader Bitcoin, with the company’s flagship Grayscale Bitcoin Trust gaining $471.7 million of the aforementioned $607.7 million sum.
This has been reflected in the BTC dominance metric — the percentage of the cryptocurrency market’s value made up by Bitcoin — as it surged from around 52% to 68% in 2019.
And secondly, there exist record levels of institutional interest and involvement in the cryptocurrency market, with Grayscale reporting that 71% of the inflows its investment funds garnered with sourced from players like traditional hedge funds, pensions, and endowments. As Michael Sonnenshein, managing director at Grayscale, said to Bloomberg:
It’s clear that we’re experiencing institutional adoption. The asset class is experiencing increased validation from legacy companies like Fidelity and CME, signaling to institutions and the investment community as a whole that crypto as an asset class is here to stay
Grayscale’s Report Underscores Bigger Trend
Grayscale’s report underscores a trend of institutional investors starting to dabble in the Bitcoin space, enabled by products like the Trust and derivative contracts offered by exchanges such as Bakkt.
Executives such as Changpeng “CZ” Zhao, chief executive of Binance, and Galaxy Digital’s Mike Novogratz have both said that institutional involvement in Bitcoin is a bullish sign that can help catalyze long-term growth in the industry.
Retail Investors Played a Role… Kinda
While there was much of a focus on institutional investment in Grayscale’s latest year-end report as laid out above, it is important to note there has been some retail influence on the investment firm’s Bitcoin inflows as well.
On Dec. 4, Charles Schwab released a report regarding its clientele’s favorite investments as of the end of the third quarter of Q3.
Under the column for millennials, those born after 1981 and before 1996, it was noted that 1.84 percent of this demographic’s collective net worth was allocated to Grayscale’s Bitcoin Trust, making the BTC-linked investment vehicle more popular than Berkshire Hathaway, Walt Disney, Netflix, Microsoft, and Alibaba Group.
This made GBTC the fifth most popular investment among millennials, falling short of Facebook’s 3.03 percent, Tesla’s 3.22 percent, Apple’s 6.18 percent, and Amazon’s 7.87 percent.
Sure, 1.84 percent isn’t “mass adoption” per se, though many in the cryptocurrency community have taken this statistic in stride.
Mike Dudas, CEO of industry outlet The Block, wrote that this statistic is the “clearest sign to me that there is retail demand for people to own bitcoin via traditional investment accounts.”