The Q1 2020 was all about significant volatility after we started a new year and a new decade with lots of losses from a violent sell-off triggered by coronavirus pandemic. The crypto market fell alongside nearly all risky assets and currencies.
However, Grayscale Investments still had its “strongest” quarter yet and continued seeing demand at a “record pace.”
This immense growth came because “investors are tactically using drawdowns to increase their exposure to the asset class, even in a “risk-off” environment,” says Grayscale in its 1Q20 report.
Over the past 12-month period, the inflows into Grayscale products jumped $1 billion, for the first time ever, “showing strong and sustained evidence that investors are increasing their digital asset exposure at current levels.”
The digital currency manager has now more than $2.2 billion in assets under management as of March 31, 2020. It had its largest quarterly rise of $503.7 million in this quarter in its entire history.
While both Grayscale Bitcoin Trust and Grayscale Ethereum Trust saw record quarterly inflows of $388.9 million and $110.0 million, respectively, the demand for the ones excluding Bitcoin products also saw an increase of 260% from 4Q19.
“These guys are crushing it. The major inflows for Grayscale Investment show how much organic demand there is for bitcoin and crypto,” said Fundstrat’s Tom Lee. “In an uncertain world, an immutable digital currency looks attractive.”
Besides the assets under management making a leap, Grayscale’s market share also jumped to a new high.
“Grayscale’s ten funds now hold 1.2% of ALL crypto in circulation and 1.7% of bitcoin in the world,” said Barry Silbert, founder and CEO of Digital Currency Group, the company behind Grayscale.
The investors of Grayscale are seeing digital assets as a medium to the long-term investment opportunity. Moreover, this growth suggests they are buying the dip and that too at the fastest pace in the company’s history.
Bitcoin, without any doubt, remains the primary choice for investors that they allocate into BTC through Grayscale Bitcoin Trust or Grayscale Digital Large Cap Fund that accounts for 80% of Bitcoin. However, 38% of its investors have now invested in multiple Grayscale products, up from 29% in 1Q19.
Grayscale’s other products covers Bitcoin Cash (BCH), Litecoin (LTC), Zcash (ZEC), Ethereum (ETH), Ethereum Classic (ETC), XRP, Stellar Lumens (XLM), and Horizen.
This demand is also driven by institutional investors which are heavily dominated by hedge funds, at 88%, up 9% from the past 12 months.
Unlike the previous times, when the geographical location of these investors roughly split between the U.S. and offshore investors, now it is more heavily weighted to offshore investors.
Meanwhile, Bitcoin is trading in the green and according to these growing numbers, more gains might be coming as large capital inflows could be a sign of perceived value and “potential future price momentum.”
“Large increases in dollar-denominated inflows relative to Grayscale AUM have historically preceded market rallies,” said Grayscale.