Institutional Investors Aren't Running Yet! Global Largest Bitcoin Trust Fund Sees Record Inflows

Impacted by the pandemic, institutional investors withdrew significant amounts of capital from traditional financial markets in the first quarter of this year. However, data from Grayscale, the world's largest Bitcoin trust fund issuer, indicates a surge in institutional interest in Bitcoin. The fund saw a record-breaking influx of funds in the first quarter of this year, reaching $389 million.

Funds Inflow Reaches Historic High

Grayscale, a New York-based Bitcoin trust asset management company, aims to provide qualified investors with trust products for Bitcoin and other mainstream cryptocurrencies. According to the company's report for the first quarter of 2020, the total funds inflow for all products in the past 12 months surpassed $1 billion, with the first quarter alone accounting for $503.7 million. The majority of funds (88%) came from institutional investors, mainly hedge funds.

Grayscale pointed out that this data is strong evidence that institutional investors are increasing their positions in digital assets at current levels:

"Many of our investors view digital assets as a long-term investment opportunity and a core part of their portfolio. They have tactically increased their exposure to the asset class through contractions, and now they are investing at the fastest pace. The total funds inflow between quarters has more than doubled compared to Grayscale's historical record, reaching $503.7 million, indicating that demand has reached new peak levels even in a 'higher-risk' environment."

Bitcoin Trust Outperforms Traditional Commodities

On the other hand, in the first quarter of 2020, the total funds inflow for Grayscale's Bitcoin Trust fund (GBTC) reached $389 million, the best quarter in history, increasing by nearly $200 million compared to the last quarter of 2019. Meanwhile, Grayscale's Ethereum Trust fund (ETHE) also saw an inflow of $110 million in the first quarter. Grayscale stated in the report that the amount of Bitcoin it currently holds accounts for 1.7% of the total circulating Bitcoin supply; the company's total assets under management are approximately 1.2% of the total cryptocurrency market cap.

The appeal of cryptocurrency trust products in the first quarter of 2020 seems to have surpassed investment products of traditional asset management companies. According to reports, due to the macroeconomic turmoil caused by the pandemic, the S&P 500 index in the U.S. plummeted by 20% in the first three months of this year ending on March 31. Institutional investors withdrew approximately $31 billion from BlackRock, the world's largest asset management company, in mutual funds and ETFs in the first quarter of this year. Grayscale expressed:

"Almost all risk assets and currencies have entered a new decade of turmoil due to the spread of the COVID-19 pandemic, which is a difficult start."

Nevertheless, Bitcoin's current market price has risen back to the levels at the beginning of this year, coupled with the upcoming halving of block rewards every four years. Many analysts believe that Bitcoin will gradually decouple from the traditional financial markets in the future and shine in future crises.

Related Reads

• Grayscale Bitcoin Trust Fund Receives Another Positive News! Successfully Registered with the SEC
• IMF Predicts Global Economic Growth Rate to Fall to -3% This Year, Can Bitcoin Escape the Crisis?

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