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Big Crypto Investors Flock to Grayscale, Sending Q2 AUM to $2.7 Billion

Last Updated March 4, 2021 2:40 PM
Gerelyn Terzo
Last Updated March 4, 2021 2:40 PM

The combined market cap of the broader cryptocurrency market is now hovering at $282.7 billion, with bitcoin’s dominance just below 67 percent. So is it retail investors or big institutions driving the market? It depends on who you ask.

Grayscale Investments attracted nearly $85 million to its coffers in Q2 2019, more than three-quarters of which originated from big investors. The digital asset investment firm’s assets under management ballooned to $2.7 billion in the second quarter  vs. $926 million quarter-over-quarter.

According to Grayscale’s report , 84 percent of inflows were from institutional investors comprised largely of hedge funds. That’s the largest institutional representation that Grayscale has seen since last July. Meanwhile, assets remain more than 20 percent below Grayscale’s peak of $3.5 billion from year-end 2017 during the last bull run.

grayscale assets
Grayscale’s assets are now at $2.7 billion. | Source: Grayscale

Despite bitcoin’s dominance, investments into altcoin products are on the rise:

“This quarter, Grayscale Products ex Bitcoin Trust accounted for 24% of inflows, capturing a larger slice of the pie compared to 1% of inflows observed in Q1 2019. Q2 2019 inflows into the Grayscale Ethereum Trust reached $14 million followed by Grayscale Ethereum Classic Trust which reached $5.5 million. In addition, 76% of Q2 2019 inflows were into Grayscale Bitcoin Trust.”

Grayscale’s increase in assets coincides with the crypto rally, which has been led by bitcoin. As Grayscale’s assets have expanded, the bitcoin price more than doubled in the second quarter.

bitcoin chart
The bitcoin price soared 160 percent in Q2. | Source: TradingView

Individual Investor Is King at Binance

As fate would have it, Binance CEO Changpeng Zhao (CZ) recently dished to Bloomberg  about the flow of capital into the exchange. According to CZ, institutional investors are not outpacing individual investors in the market. CZ said it’s a combination of individual investors and institutions who fueled bitcoin’s recent performance. But at the end of the day, roughly half of Binance’s trading volume, or 60 percent, stems from the individual investor.

“We have not seen institutions growing faster. What we’ve seen is pickup in both places. The number of institutions coming into this industry has not increased that tremendously in 2019 yet.”

Investors have been flocking to Binance for the recently launched margin trading feature, which gives traders the opportunity to add 3x leverage. According to CZ cited in Bloomberg, some 10,000 traders accessed some $15 million in leverage on day-one of margin trading at the exchange. The Binance CEO expects that margin trading will only grow more popular, bolstering both trading volumes and volatility in the interim.