Grayscale, the world’s largest crypto asset manager and a subsidiary of Digital Currency Group, raised $359.5 million in 2018, pushing strongly through the intense 14-month bear market.
As the prices of crypto assets such as Bitcoin and Ethereum began to fall rapidly by the latter half of last year, the overall demand for the asset class has declined.
As such, according to Grayscale, the fourth quarter of last year was underwhelming but the business still managed to reach a record year in 2018.
“Despite a deceleration of investment into digital assets in the fourth quarter, Grayscale raised $30.1 million over the last three months, bringing our full year 2018 inflows to $359.5 million. This marks the strongest calendar year inflows since the inception of our business,” read the official Grayscale Digital Asset Investment Report.
Year of Institutional Investors in Crypto
On February 14, Morgan Creek announced that two public pension funds in the U.S. along with a hospital, a university endowment, and an insurance company invested $40 million in its cryptocurrency fund.
This morning our team at Morgan Creek Digital announced a new $40 million crypto venture fund anchored by two public pensions.
The institutions aren’t coming.
They’re already here. 🚀
— Pomp 🌪 (@APompliano) February 12, 2019
The deal marked the first public investment of U.S.-based pension funds and investors reacted positively, seeing the potential of the deal to lay the groundwork for the next wave of institutional investors to come into the crypto asset sector.
Grayscale also recorded a fairly large inflow of capital from institutions throughout the past 12 months.
The official report of Grayscale disclosed that 66 percent of the $359.5 million was invested by institutional investors, which is worth just more than $237 million.
The report read:
“We saw that retirement accounts comprised a higher percentage of total demand for Grayscale products in the fourth quarter (40%), while institutional investors continued to be the dominant source of inflows for 2018 (66%).
While the dollar amounts invested declined in Q4, institutional investors share of the ‘new investment pie’ was roughly consistent throughout the year.”
Previously, Pathfinder Venture Capital chief investment officer Ari Paul and billionaire investor Mike Novogratz emphasized that similar to retailers, institutions tend to wait for other institutional investors to commit to an asset class first before investing in it.
The $237 million invested by institutions in Grayscale’s crypto fund and the $40 million raised by Morgan Creek from Fairfax County’s Virginia’s Police Officer’s Retirement System and Employees’ Retirement System could encourage more large-scale institutional investors to consider cryptocurrencies in the near-term.
Institutions Feeling Comfortable With the Asset Class
Whether cryptocurrencies are suffering an intense correction or not, for institutional investors, it is of the utmost importance that the asset class is supported with trusted custody, regulated investment vehicles, and well-structured markets.
As VanEck digital asset director Gabor Gurbacs said:
“Most large institutions do not really care if Bitcoin ends 2019 at 3,000 or 10,000. I think market structure is getting better every day and crypto start to look more and more like the commodities and equities markets.”
Institutional investors, pension funds, and family offices are known to be more cautious in participating in a new asset class or a new market than retail investors.
For the inflow of capital from institutional investors into the cryptocurrency market to rise at a sustainable rate, recognized financial institutions such as Nasdaq, Fidelity, and ICE will have to continue building the infrastructure supporting digital assets and the number of institutional investcommittingting to the asset class will have to steadily increase in the coming months.