Investment firm Grayscale’s assets under management surpassed $6 billion USD for the first time, the firm’s CEO Barry Silbert shared, showing a continuous increase in institutional demand for Bitcoin.
Grayscale operates various regulated publicly-traded investment vehicles that tailor to accredited and institutional investors.
The firm’s most widely-used product is the Grayscale Bitcoin Trust, which allows investors to gain exposure to Bitcoin through a stock traded on OTC Markets (OTCMKTS).
Bitcoin Trust Surpasses $5 Billion in Assets Under Management
The largest product among Grayscale’s suite of investment vehicles is the Grayscale Bitcoin Trust (Btc). Each share of Btc represents 0.00095723 bitcoin, about one-thousandth of a bitcoin.
Institutions typically buy a large number of shares in Btc to hold bitcoin through Grayscale, which offsets security risks of directly holding bitcoin. For institutions, Bitcoin is a different asset compared to the traditional investment vehicles they hold. The concept of self-custody is still relatively new to institutions, which might make custodied products more appealing in the near future.
The assets under management of the Grayscale Bitcoin Trust represents the inflow of institutional capital into Bitcoin, at least in the U.S. market.
According to Grayscale’s first-half report for 2020, institutions were the main driver of the firm’s products from January to August. Nearly 84% of the investments came from institutional investors, accounting for the overwhelming majority of Grayscale’s inflows. The report reads:
“Institutional investors continued to be the dominant driver of investment capital, accounting for 84% of investment. 81% of returning institutional investors in 2Q20 have now allocated to multiple products, an increase from 71% in T12M. Additionally, new investors accounted for $124.1 million of inflows and 57% of the investor base in 2Q20, up from 49% during the T12M.”
Apart from Grayscale’s optimistic figures, there is another data point that shows growing institutional involvement.
CME Open Interest Continues to Surge
Data from analytics firm Skew shows that the open interest in CME’s Bitcoin futures market has risen to $948 million USD - an almost threefold increase from July 20, when the open interest was at a mere $372 million USD.
Like Grayscale, CME also tailors to accredited and institutional investors. The CME Bitcoin futures market is primarily used by institutions to bet for or against Bitcoin without risks of holding Bitcoin directly.
The term open interest describes the sum of all long and short contracts in the market. It shows that nearly a billion dollars are anticipating the near-term price trend of Bitcoin.
The threefold increase in the CME Bitcoin futures market’s open interest indicates an increasing institutional activity in the Bitcoin market.