Bitcoin demand continues to rise – Grayscale explains why

Bitcoin (BTC) and gold: The two are often compared with regard to the store of value. Both assets can be used to store value. Bitcoin is easier to transport and sell, but its price is more volatile. Gold is the traditional Save Habour, but not as dynamic as Bitcoin. The picture shows a bitcoin in front of gold pieces.
The investment company Grayscale is currently experiencing growing interest from hedge funds and other institutional investors for their funds in Bitcoin and Ethereum. Now the company has commented on it and explained why the demand is currently so high.

Grayscale demand for Bitcoin and Ethereum is increasing rapidly

As already known, Grayscale has extremely increased the inventory of physical Bitcoins. Over 30,000 BTC were added several months ago and bought over 80% of the BTC produced by the miners in the same period.

In total, hedge funds and other financial institutions have deposited $ 1.7 billion into Grayscale Investment’s bitcoin and cryptocurrency funds. At least that’s what Rayhaneh Sharif-Askary, director of investor relations at Grayscale, said in an interview.

Sharif-Askary took part in the Coinscrum Markets Podcast to talk about Grayscale’s rising volumes. According to host Nisa Amolis, the crypto broker and custody service managed assets of $ 3.8 billion in June, a significant jump from the previous months.

In addition, the average weekly investments in Grayscale’s Cryptocurrency Trusts increased over 800% over the year, from $ 3.2 million per week in 2019 to nearly $ 30 million per week in 2020.

How can the sudden increase in interest in Bitcoin and Co. be explained?

According to Sharif-Askary, 2020 has so far been the year of macroeconomic instability and unprecedented monetary policy stimulus. Institutional investors are looking for alternative safeguards to weather the emerging crisis.

“This was a record year – a record quarter for us. Obviously we have never seen such demand for our products before, ”said Sharif-Askary in an interview. In addition, many of the buyers were traditional hedge funds.

Of the roughly 90% of clients that come from institutions, 44% are multi-strategy hedge funds, while another significant portion comes from long / short hedge funds, said the Grayscale executive director.

Nisa Amolis, the host of Coinscrum Markets, asked if the exposure is in the form of „401k plans“ as has been the trend since Grayscale operations began in 2013.

Sharif-Askary responded that „tax-deferred accounts have always been and will continue to be one of the most important vehicles for high profile investors“ as Bitcoin „is not set up to fit into the operational and legal framework of investors“.

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Institutional investors diversify with Bitcoin and Co.

“Ultimately, our investors want exposure to digital assets in a way that they don’t have to buy those assets to hold them for themselves,” she said.

Last year, $ 390 million flowed into Bitcoin from these investors, while $ 110 million flowed into Ethereum. Sharif-Askary added that Grayscale’s customers are diversifying more into altcoins. 38% of their customers hold more than just Bitcoin, up 9% over the same period last year.

She attributes the growth to the „political impact of COVID-19“. After all, institutional investors, like everyone else, are interested in safeguarding scarce assets that „could be used as an inflation hedge in a world where we are faced with unprecedented monetary incentives“.

The statements by Grayscale clearly show that even large institutional investors are slowly but surely looking at Bitcoin and other cryptocurrencies as possible investments. So it is only a matter of time before other companies notice that Bitcoin can be used to diversify their own portfolio very well .

We are curious how the interest at Grayscale will develop this year. As always, we will keep you up to date.