At the beginning of 2020, crypto firm Grayscale began the year with $2 billion of assets under its management. By the end of 2020, it had $20.2 billion in assets. Last year marked a pivotal turning point for digital currencies as institutional investors began showing more interest in the cryptocurrency market, which saw more demand from pension and hedge fund investors.
Grayscale is a subsidiary of the New York-based Digital Currency Group. The digital currency asset management firm offers a way for investors to invest in a publicly-traded currency without having direct ownership of the coins.
Michael Sonnenshein, CEO of Grayscale, said: “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.”
Investors in the know have watched as the most famous cryptocurrency, Bitcoin has skyrocketed to record levels multiple times. As of Sunday, January 17, 2021, Bitcoin shares stood right at $35,000. The digital currency topped $40,000 at one point last week, and exactly one month earlier, the cryptocurrency had set a new record at just over $20,000 per share.
Notable investors such as Paul Tudor Jones and Stanley Druckenmiller have gotten in on the action and made sizeable Bitcoin investments. The excitement in the industry has only fueled momentum for other cryptos, like Grayscale. Wall Street has used Grayscale as a proxy to invest in the original cryptocurrency, bitcoin.
Grayscale’s Bitcoin Trust has become very popular with high-profile investors. Jones, a billionaire hedge fund manager, has said bitcoin is the “best inflation hedge.” Jones said it’s like putting your bets with Google and Apple.
Wall Street analysts say Jones’ backing of cryptocurrency, along with Druckenmiller’s, paves the way for investor confidence in the digital currencies. In fact, institutional investors accounted for 87 percent of Grayscale’s investor profile. Most saw their investments double in months. By the end of the third quarter, the average investment was around $3 million.
Professional investors are now seeing crypto as a safe-haven asset like gold. Sonnenshein said, “the most prevalent theme for investment conviction in bitcoin is coming from a rotation out of gold. Investors are also anecdotally sharing that that’s where, and how, they’re making room for bitcoin in their portfolios.”