Institutional investors increase crypto exposure amid Covid-19 crisis

If the latest figures released by cryptocurrency asset manager Grayscale are anything to go by, then it would appear that institutional investors have become increasingly open to crypto investments amid the ongoing economic crisis triggered by Covid-19.

In its first quarter report the leading digital asset investment firm reported that it had managed to raise $503.7m (£403.2m, €463.6m) as a total investment into Grayscale Products, almost doubling its previous quarterly record of $254.8m from Q3 2019.

According to the company, hedge funds and other institutional investors accounted for 88 per cent of this quarterly inflow. Importantly, $160.1m of the total amount raised came from new investors, emphasising that digital assets are becoming increasingly attractive to funds looking to diversify amid the ongoing marker uncertainty caused by the coronavirus outbreak.

Grayscale’s 12-month inflows surpassed the $1bn threshold for the first time, while its average weekly investment in 12 months for all products totalled $20.6m. Once more, institutional investors dominated, accounting for 79 per cent of the investment.

While its Bitcoin Trust remained Grayscale’s most popular product, the fact that inflows into its Ethereum (ETH) Trust started to outdo it towards the end of March indicates that institutional investors are becoming increasingly open to cryptos other than Bitcoin.

While it has since recovered somewhat, Bitcoin plunged 30 per cent in mid-March, weakening its appeal as a useful hedge uncorrelated to wider market panics.

According to the report, the world’s largest crypto asset manager now controls 1.2 per cent of the world’s cryptocurrencies, with 1.7 per cent of the total Bitcoin supply, up 0.1 per cent from the previous quarter.

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