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Crypto demand from institutional investors fuels a 900% rise in Grayscale’s assets in 2020

Grayscale's crypto assets, which were valued at $2 billion at the start of 2020, rose to $20.2 billion by year-end.

Image by 3D Animation Production Company from Pixabay

Fri, 15 Jan 2021, 14:28 pm UTC

The entry of institutional investors into the crypto scene last year has given a massive boost to the major players in the industry. For instance, Grayscale Investments saw a massive 900 percent rise to its assets under management last year.

In a company quarterly report released on Thursday, crypto investment firm Grayscale revealed that its assets rose to $20.2 billion in 2020, according to CNBC. The firm’s asset was only valued at $ 2 billion at the start of last year, which means that its AUM rose by a staggering 900 percent in just a year.

Grayscale’s growth was mainly driven by increasing demand from institutional investors. The firm's clientele includes pension funds, hedge funds, and endowments.

Institutional investments account for 87 percent of the crypto investment firm’s inflows. The average size of investments more than doubled from around $3 million in the third quarter to an average of $6.8 million in the fourth quarter.

“We saw a meaningful acceleration of institutional participation,” said Grayscale CEO Michael Sonnenshein. “There’s no longer professional risk of investing in the digital currency asset class — there’s probably more career risk in not paying attention to it.”

Many investors started to view cryptos such as Bitcoin as an alternative to gold last year. Institutions began buying BTC as a hedge against the anticipated inflation caused by money printing activities in response to the coronavirus pandemic.

“The most prevalent theme for investment conviction in bitcoin is coming from a rotation out of gold,” Sonnensheim added. “Investors are also anecdotally sharing that that’s where, and how they’re making room for bitcoin in their portfolios.”

Many investors credit the increasing demand from institutional clients as one of the key reasons for Bitcoin’s ongoing rally which started last year. BTC smashed the previous December 2017 all-time high and even traded past $41,000 earlier this month.

While Bitcoin is known for its highly volatile price movements, investors are now viewing dips as opportunities to add more of the crypto to their portfolios. “Investors are used to seeing those types of cycles in the price,” the CEO said. “They’re using pullbacks in price opportunistically to double down and add to their positions.”

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