Grayscale Investments’ Q3 Report Shows Institutional Investors Are Taking Positions in Bearish Crypto Market

The Digital Currency Group-owned digital currency investment company, Grayscale Investments, has published its quarter three (Q3) 2018 report. The report highlights that institutional investors have made up the majority of its fund inflows in the last three months, which suggests that “smart money” may be buying into digital currencies in anticipation of an upcoming rally.

70 Percent of new Money from Institutional Investors in Q3/2018

Grayscale Investments provide investments trusts that hold digital currencies and, thereby, enables institutions and accredited investors to invest in digital assets through a regulated investment vehicle. Currently, Grayscale offers single-asset exposure to BTC, BCH, LTC, ETH, ETC, XRP, ZEN, and ZEC, and runs a digital asset large-cap fund that invests in a portfolio of composed of BTC, LTC, XRP, ETH, and BCH.

The Grayscale Digital Asset Investment Q3 Report shows that $81.1 million has flown into Grayscale’s digital currency trusts of which 70 percent came from institutional investors. Year-to-date, $329.5 million of new funds have flown into Grayscale’s investment products with a total of 59 percent coming from institutional investors.

This data suggest that financial institutions are increasingly opening up to investing in bitcoin and other digital assets, albeit through a regulated investment vehicle. The data may also indicate that those institutional investors who are brave enough to venture into digital asset investing are buying bitcoin and other digital currencies now in anticipation of a rally in the near future.

What Are Investors Buying?

Grayscale offers eight single-asset funds and one diversified digital asset fund. However, the majority of inflows have been into the Bitcoin Investment Trust as opposed to the company’s range of altcoin funds.

In the third quarter of 2018, 73 percent of new inflows went into the Bitcoin Investment Trust; Year-to-date that figure stood at 66 percent. This suggests that the majority of investors still prefer to invest in the world’s largest and most popular digital currency as opposed to its higher-risk peers from the altcoin market.

The second most popular fund has been the Ethereum Classic Trust, which was the first altcoin-based trust Grayscale, launched in April 2017. The recently launched ZEN Investment Trust was the third most popular fund in Q3/2017 after BTC and ETC.

Roughly an equal number of new funds went to XRP, BCH, ZEC and Grayscale’s diversified digital asset fund in the last quarter while Litecoin and Ether received only very little investor interest.

Who Are the Investors?

Interestingly, Grayscale’s quarterly report also gives an insight into the type of investors that have been buying shares in its digital currency funds. As already mentioned, institutional investors make up the largest segment of investors in Q3/2018 (70 percent).

What may come as a surprise for some, the second largest investor group have been retirement accounts that have also been diversifying into digital currencies. In Q3, 18 percent of new funds came from retirement accounts.

Accredited investors, i.e.high-net worth individuals, contributed to 11 percent of new fund inflows in Q3/2018. Finally, one percent of inflows came from family offices.

The majority of new funds came from U.S.-based investors (64 percent) while 34 percent of the new money came from offshore investors. Finally, “other investors” contributed to two percent of new fund inflows into Grayscale’s products.