Grayscale is the benchmarking existence of Bitcoin institutional investors and the world’s largest digital currency asset management company.
Recently, Grayscale announced the digital asset report for the fourth quarter of 2020, which comprehensively introduced the activities of various investment products and analysis of the investor population in 2020. According to the report, the investment in the Grayscale product series set a new record, reflecting the soaring demand and increasing acceptance of digital currency asset classes by financial institutions.
In the last quarter of 2020, Grayscale raised a total of US$3.3 billion, more than three times that of the third quarter
In 2020, the Grayscale series of products raised a total of more than 5.7 billion US dollars in funds
In the fourth quarter of 2020, 93% of capital inflows came from institutional investors
Gray scale Ethereum trust products are also worthy of attention. The deposit in the fourth quarter was US$341.8 million, an increase of US$789.4 million throughout 2020.
The investment share of institutional investors has also risen sharply, from an average of US$2.9 million in the third quarter of 2020 to US$6.8 million in the fourth quarter.
Today’s article, share the gray report.
Introduction
In 2020, people’s interest in Bitcoin investment products has risen sharply. For several consecutive quarters, Grayscale has set a new record for the company’s capital inflow. In the last quarter of 2020, Grayscale raised a total of US$3.3 billion, more than three times the US$1.05 billion in the third quarter of 2020. It is worth noting that in the last week of December before the end of the quarter, Grayscale raised nearly $1 billion.
Institutional assistance, Grayscale has become one of the fastest growing asset management companies
In 2020, the Grayscale series of products raised a total of more than 5.7 billion U.S. dollars, which is more than four times the cumulative inflow of 1.2 billion U.S. dollars from the company’s establishment in 2013 to the end of 2019. Although the company’s assets under management at the beginning of 2020 were US$2 billion, as of January 13, 2021, the company currently holds more than US$24.7 billion in assets, making it one of the fastest growing asset management companies in history.
In the fourth quarter of 2020, institutional investors participated in the investment of Grayscale products, and 93% of the capital inflow came from these investors.
Bitcoin Trust and Ethereum Trust lead
Continuing past trends, Grayscale® Bitcoin Trust led investment demand with an inflow of US$2.8 billion in the fourth quarter of 20.
The demand for other grayscale products has also reached a record level, with an increase of nearly 1,300% compared to the fourth quarter of 2019. In 2020, investors allocated US$1 billion on products other than Grayscale Bitcoin Trust. The leader in this trend is Grayscale’s Ethereum Trust, which has inflows of US$341.8 million in the fourth quarter and US$789.4 million in 2020.
Bitcoin: 2020 review
In 2020, the value of Bitcoin has been severely tested by the global spread of the new crown virus, the devastating stock market crash, and whirlpool-like geopolitical tensions. However, under the unprecedented monetary policy of the United States, Bitcoin has proven its resilience and will become one of the best performing assets of the year at the end of 2020.
Bitcoin’s ability to perform during periods of high volatility has attracted the attention of financial institutions, investors, and industry observers more than ever before. Influential public figures in the financial and technological fields have publicly expressed their support for Bitcoin as an investment target, product and currency commodity.
When looking back at history in the future, 2020 will become an important turning point for the large-scale adoption of Bitcoin and even more broadly digital currencies.
Grayscale Outlook 2021
Bitcoin arms race
Bitcoin is becoming a widely used diversification tool in investment portfolios. The views of major investors, consulting companies, and even banks about Bitcoin have changed drastically.
In the past, if Bitcoin is included in asset management, there will be risks; in the future, it will be reversed. If Bitcoin is not added to the asset portfolio, you will face the risk of falling behind in your career. In 2020, we see some institutions add Bitcoin to their balance sheets, and in 2021 we may see many countries follow suit and rush to Bitcoin.
Interest from financial advisor
In the fourth quarter of 2020, registered investment advisors (RIA)’s interest in Bitcoin surged. More and more financial advisors are receiving questions about digital currencies than ever before.
With the performance of major digital currencies such as Bitcoin in 2020, we have reason to expect that more investors and advisers will consider how to best fit this asset class in a larger investment portfolio. Wealth management managers advise about $80 trillion in assets, and most of them have not yet recommended digital assets.
Using Bitcoin as a reward may become a new source of demand for Bitcoin
The annual consumption of credit cards in the United States is US$4 trillion, and the annual consumption of debit cards exceeds US$3 trillion. Companies such as Fold, CashApp, and BlockFi have launched credit cards with bitcoin rewards in 2020. We expect major credit card companies to follow suit as they see the success of these Bitcoin products.
Bitcoin will stimulate the use of clean energy
China’s energy consumption and the concentration of mining areas have always been hot topics for Bitcoin. This statement is rapidly changing. North America is becoming a big mining country, and companies like Foundry are also integrating the Bitcoin mining industry into an efficient energy infrastructure. Energy companies are purely out of economic considerations and will use their previously wasted energy and benefit from it.
Bitcoin mining helps make full use of previously idle energy infrastructure and may be included in public green energy plans.
Decentralized Finance (DeFi) is on the rise
Billions of liquidity loans and transactions have made Decentralized Finance (DeFi) the most powerful non-bitcoin use case in the digital currency ecosystem. As the pursuit of yield in the traditional market has become fierce, we expect major financial companies to consider integrating decentralized agreements.
Countries begin to adopt digital currency
Although many countries have laws surrounding digital currencies, few countries have seriously introduced or incorporated them into a set of financial instruments controlled by the government. Recent guidance from the OCC indicates that Bank of America may seek to incorporate digital currency into its settlement infrastructure.
In 2021, we may see digital currencies begin to integrate into the national bank infrastructure.
Grayscale Digital Asset Management Report: Digital Overview
Currently, Grayscale manages a total of USD 20.2 billion in digital assets.
As far as the fourth quarter of 2020 is concerned, new assets will be $3.3 billion.
Average weekly investment for all products: $250.7M (US$250.7 million)
Grayscale Bitcoin Trust’s average weekly investment: $217 million
In addition to Bitcoin, the average weekly investment in other trust products of Grayscale: 33,600 USD
Grayscale Ethereum Trust’s average weekly investment: $26,300
Grayscale Digital Large Cap Fund (Grayscale Digital Large Cap Fund) average weekly investment: 1.6 million US dollars
93% of investors are from institutional investors, led by asset management managers
For the whole year of 2020:
Investment in all products: US$5.7 billion
Average weekly investment for all products: $109.8M (US$109.8 million)
Grayscale Bitcoin Trust’s average weekly investment: $90 million
In addition to Bitcoin, the average weekly investment in other trust products of Grayscale: $19,800,000
Grayscale Ethereum Trust’s average weekly investment: $15,200
Grayscale Digital Large Cap Fund (Grayscale Digital Large Cap Fund) average weekly investment: 1.4 million US dollars
86% of investors are from institutional investors, led by asset management managers
Here are some key points
2020 is a landmark year for Grayscale and a wider range of digital assets. Thanks to the community and our investors for making this possible. We are honored to share the data, which reflects the mass adoption throughout 2020, especially the fourth quarter.
$3 billion added in the fourth quarter
Grayscale has experienced unprecedented investor demand and inflows of $3.3 billion in funds in the fourth quarter. The investment in the gray series products, the total inflow of assets from 2013 to 2019 was 1.2 billion US dollars. In 2020, it exceeded US$5.7 billion, more than four times the previous amount. Therefore, since its establishment, the total inflow of Huizhou series products is 6.9 billion US dollars.
$20 billion
At the beginning of the year, the scale of assets under management was 2 billion US dollars, and by the end of 2020 it reached 20.2 billion US dollars. In 2020, Grayscale Bitcoin Trust is among the fastest growing investment products in the world, growing from US$1.8 billion to US$17.5 billion in asset management. This is an incredible proof of the maturity of the digital currency ecosystem.
The inflow of Grayscale Bitcoin Trust exceeds Bitcoin mining
As we pointed out in the previous report, the proportion of funds flowing into Grayscale Bitcoin Trust in mining Bitcoin continues to grow. This metric is significant because miners are natural sellers in a well-known market, and they often use newly mined bitcoins to pay for operating expenses. In the fourth quarter of 2020, the inflow of bitcoin was approximately 194% of the bitcoin mined.
However, these comparisons are only to illustrate the supply and demand relationship in the market. They cannot be used to describe where the new bitcoins were mined during the reporting period.
Institutional investors join
Among gray investors, institutional investors have always accounted for the majority. Especially in the fourth quarter of 2020, institutions accounted for 93% of capital inflows, that is, $3 billion came from institutions. Considering the recent series of news, this may not come as a surprise.
Institutions have become enthusiastic about Bitcoin. In fact, Grayscale Bitcoin Trust accounted for 87% of all inflows of our products in 2020, the highest proportion since the second quarter of 2017, which further proves that the institution chose Bitcoin as a reserve asset . Institutional investment quotas are also growing. Institutions’ average participation amount was US$6.8 million, higher than the average US$2.9 million in the third quarter of 2020.
RIA demand surges
In the fourth quarter of 2020, Grayscale received a large number of calls from wealth managers who are interested in learning more about Bitcoin to meet their growing demand for customer inquiries. This is part of the emerging trends in the past six months. It is essential to expand the scope of Bitcoin acceptance.
Details of the fourth quarter of 2020
In the fourth quarter of 2020, even taking into account the fees, expenditures and other costs related to the fund, most of Grayscale’s products clearly outperformed the major indexes.
With the increase in prices and the inflow of institutional funds, Grayscale’s share of assets under management reached a record high in the fourth quarter of 2020. This year, Grayscale’s share of assets under management rose from US$2 billion at the beginning of the year to US$20.2 billion, an increase of approximately 10 times.
In the past 7 years, investor interest has slowly built up and then accelerated rapidly. In fact: The record breaking for four consecutive quarters in 2020 marks a turning point for Grayscale and the development of digital assets as a whole.
Specifically, the monetary and fiscal measures of governments around the world have become a catalyst for the surge in interest in Bitcoin.
As shown in the figure below, institutional investors continue to increase the scale of distribution. The average amount of participation by institutions is US$6.8 million, which is more than double the average investment of US$2.9 million in the third quarter of 2020.
With currency inflation becoming an urgent concern, institutional investors took action to buy Bitcoin. This view you saw in the media and the exchanges between our team and investors also support this view. In this paradigm, Bitcoin is the leader among all our product lines.
Although due to the halving in May 2020, the supply of new bitcoin has slowed down. The speed of flowing into the grayscale is obviously accelerated. In terms of the amount of inflows of Bitcoin, Grayscale Bitcoin Trust’s new addition in the fourth quarter of 2020 is nearly twice the amount of mining in the same period. This trend is still a major factor in the current limited supply.
With the investment community’s favor and use of gray products, our management ratio of various digital asset circulation supplies has also been greatly increased. During this year, the number of bitcoins in circulation managed by Grayscale increased from 1.45% to 3.31%. Similarly, the proportion of Circulation Ethereum managed by Grayscale has also increased from 0.47% to 2.61% in 2020.
Next, we will provide an analysis of the standard series of investment activities in the fourth quarter of 2020 and the entire year of 2020.
Grayscale inflow of funds
In the fourth quarter, Grayscale’s inflow of assets increased by 3.3 billion U.S. dollars, and in 2020 the entire year inflow of assets was 5.7 billion U.S. dollars.
The average weekly investment for all products in the fourth quarter of 2020 was US$250.7 million, and for the entire year of 2020, the average weekly investment was US$109.8 million.
In the fourth quarter of 2020, the inflow of funds into Grayscale Bitcoin Trust reached a record $2.8 billion. This brings the inflow of Grayscale Bitcoin Trust to US$4.7 billion in 2020, which is more than four times its previous cumulative inflow.
In the fourth quarter of 2020, in addition to Grayscale Bitcoin Trust, the demand for Grayscale’s other products increased to 436.4 million US dollars, an increase of 35% from the previous quarter, and an increase of nearly 1,300% compared with the fourth quarter of 19th. Most of the growth was due to the continuous inflow of Grayscale Ethereum Trust (US$341.8 million), making Grayscale’s inflow of funds for other products except Bitcoin Trust reached US$1 billion in 2020.
In the fourth quarter of 2020, institutional funds accounted for 93% of total inflows. While well-known investors and asset management companies have issued announcements, there has also been a meaningful increase. For many investors, the paradigm has changed. It was risky to buy bitcoins, but now it is risky to miss bitcoins.
Among the geographical sources of new investment funds for Grayscale products this quarter, the proportion of foreign investors increased slightly (55%), consistent with the annual situation in 2020.
in conclusion
To quote Thomas Jefferson:
In every country that allows the junk issuance of banknotes, whether in the past, present or in the future, will inevitably embark on the road of junk issuance of currency
In 2020, institutional investors realized that Bitcoin is a viable option to hedge against the junk issuance of banknotes without having to face complex management of gold. In a world where there are more than $17 trillion in negative-yielding debt, we believe that in 2021, Bitcoin will continue to be the reassurance among investors’ portfolios.
Bitcoin occupies a central position in the investment world. With a total capital inflow of approximately US$5.7 billion, Grayscale is fortunate to become one of the main ways to invest in Bitcoin in 2020.
We are proud to be one of the fastest growing asset management companies in the world, and continue to thank investors for entrusting us with more than $20 billion. We look forward to continuing to serve our customers. As people’s adoption of digital assets accelerates in 2021, we look forward to continuing to serve the investment community.
