Asset management is seeing increasing interest from traditionally risk-averse investors.
Michael Sonnenshein, the new CEO of influential crypto asset management firm Grayscale, confirms to Bloomberg that more and more pension funds are investing in Grayscale’s crypto investment products.
To this end, he explains:
„We are seeing increased demand not only from hedge funds, which have long shown strong interest, but now also from other institutions, pension funds and endowment funds. […] The size of their positions is also increasing at the same time.“
Grayscale is currently arguably the largest buyer of Bitcoin (BTC), with the asset management firm now owning just under 3% of all available BTC. It buys the cryptocurrency indirectly on behalf of its clients, who are primarily institutional investors.
Total assets under management (AUM) across all 10 crypto investment products amount to more than 27 billion US dollars. The Bitcoin investment fund is by far the most popular vehicle, accounting for $23 billion in assets alone. The Ethereum investment fund, meanwhile, comes in at $3.6 billion, while the Digital Large Cap Fund accounts for $339 million.
The pension funds thus join many other institutional investors who have already gradually ventured into the bitcoin market in 2020. A survey by Fidelity Investments had in turn revealed last year that 36% of all financial institutions in the US and Europe say they own Bitcoin Aussie System cryptocurrencies or corresponding derivatives. A quarter of all respondents own Bitcoin, while 11% hold Ether (ETH).
So the influx of capital through institutions is indeed increasing, as Grayscale confirms. Even pension funds and endowment funds, traditionally considered risk-averse, now want a piece of the Bitcoin pie.
Grayscale’s aggressive Bitcoin buying is driving the Bitcoin price ever higher, which is tantamount to a self-reinforcing effect. Since Bitcoin has a fixed amount in circulation anyway, the available supply is becoming increasingly scarce due to the buying activity of institutions that want to hold the cryptocurrency for the long term and virtually take it out of circulation. In this context, Sonnenshein explains:
„We are dealing with a really scarce investment product here. The more units are taken out of circulation, the scarcer it becomes.“