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Grayscale Investment breaks records for Q2, 2020

Benson Toti

Grayscale investment saw $900mil in crypto investment inflow during Q2, 2020 – a record amount.

In its recent Q2 digital asset investment report, Grayscale Investment disclosed that it recorded a total investment into its trust at $905.8 million – of which, $751.1 million went to its Bitcoin trust and $135.2 million to its Ethereum trust.

The inflow to both trusts are at record levels. The overall crypto trust almost doubled of its previous quarter high at $503.7 million. Up to 85% of investments in Q2 came from institutional investors.

Grayscale commented, “Grayscale recorded its largest quarterly inflows, $905.8 million in 2Q20, nearly double the previous quarterly high of $503.7 million in 1Q20. For the first time, inflows into Grayscale products over a 6-month period crossed the $1 billion threshold.

There is speculation that people are investing in more crypto assets besides Bitcoin – Ethereum based DeFi is hot, and there is increasing attention to the world’s second most valuable token by market cap.

Grayscale’s Ethereum trust, Litecoin trust and Bitcoin Cash trust received more attention, and the value of Grayscale’s altcoin trusts have increased by nearly 650% over the last year.

Asset Under Management (AUM) at Grayscale as of July 15th totalled $4.1 billion, with the Bitcoin Trust and the Ethereum trust leading with $3.6 billion and $417 million, respectively.

New investors flock to Grayscale funds

Grayscale funds make owning Bitcoin easy as all the tokens are held by a fund. This arrangement appears to be especially appealing to institutional investors, who were responsible for the majority of the investment in Q2.

Grayscale and its Bitcoin trust has sparked various controversies due to the fees the company charges. This may or may not dissuade institutional investors, who view counterparty risk in a different way than most retail investors.

The company charges a 2% maintenance fee annually, where other trading platforms do this as a one off payment. Grayscale’s broker will also take commission when a purchase is completed. The broker fee will range around 3.5% to 8.5% depending on the transaction.

Regardless of the fees, Grayscale seems to be cementing itself as a go-to platform for institutional investment in cryptos. Many of these are limited by strict counterparty agreements, and aren’t able to buy cryptos outright.

If we see more institutional interest in decentralised assets, there is a good chance that prices will rise alongside institutional buying. Gold has seen a large increase in institutional buying in 2020, so it isn’t difficult to imagine a scenario where crypto assets also find a bid over the next few months.

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