The price of bitcoin has more than tripled this year, making it one of the best performing asset classes out there. Not surprisingly, institutional investors have piled into bitcoin to take advantage of the terrific price rally and mint more money.
This is evident from the latest data from bitcoin-focused investment firm Grayscale, whose total assets under management (AUM) just crossed the $3 billion mark.
Analysts expected institutional investors to drive into cryptocurrencies this year, and that has been the case so far.
Grayscale reported in May that hedge funds went on a bitcoin buying spree. In the first quarter of 2019, hedge fund inflows into Grayscale’s products shot up to $24 million as compared to just $1 million in Q4 2018. The firm also added that 56% of its total investments during the quarter were driven by hedge fund inflows, leading to a 42% quarter-over-quarter jump in the firm’s total inflows.
Grayscale’s publicly-quoted Bitcoin Investment Trust (GBTC) seems to be the biggest beneficiary of the hedge fund inflows. The product accounted for nearly $2.85 billion of the firm’s total assets under management according to the latest report.
That’s not surprising as GBTC is expected to soar in light of bitcoin’s latest price rally, according to Fundstrat co-founder Thomas Lee. So hedge funds seem to be driving into the investment vehicle so that they don’t miss out on the massive gains that bitcoin can potentially deliver.
Grayscale’s AUM stood at $1.3 billion at the beginning of May. GBTC alone accounted for nearly $1.2 billion of the total corpus.
So, the investment firm has seen a massive increase in its AUM thanks to bitcoin’s parabolic price rally.
The price of bitcoin has rallied remarkably this year despite geopolitical tensions and a volatile stock market that’s giving rise to fear among investors. This has cemented bitcoin’s position as a safe-haven asset, giving hedge funds a new asset class to invest in other than the likes of gold.
This is probably why institutional investors are now more inclined toward bitcoin as an investment. Asset manager Fidelity, which started a bitcoin custody service for its customers earlier this year, carried out a survey of 441 institutional investors. It found out that 72 percent of the surveyed investors have a preference toward purchasing investment products with digital assets.
What’s more, 57 percent of the surveyed investors revealed that they prefer to buy digital assets such as bitcoin directly. Fidelity found out that nearly half of the institutional investors that it surveyed are willing to include digital assets in their portfolios.
This is why you shouldn’t be surprised to see hedge funds putting more money into bitcoin and Grayscale’s products as a greater number of institutional investors see a place for digital currencies in their portfolio.
Last modified: March 4, 2021 2:37 PM