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Institutional interest in Ethereum skyrockets, Bitcoin not affected

  • Data from the largest crypto management firm, Grayscale, is showing a growing inflow in Bitcoin and an increased institutional interest in Ethereum.
  • In the first quarter of 2020, investors injected $110 million into the Grayscale Ethereum Trust. 

A report from Grayscale, the largest crypto-management company, shows an increase in institutional investment in Bitcoin and Ethereum. In a report summarizing the investor activity in the first quarter of 2020, Grayscale highlights the growing interest in Ethereum and the large sums of money the company has received from institutional investors. It is noteworthy that this is happening in the middle of a financial crisis due to the COVID-19 pandemic, which affected the prices of all major cryptocurrencies, but without affecting the inflow of institutional capital.

Ethereum is undervalued and could explode

According to the report, Grayscale had one of its best quarters in recent years. The fund management company received investments totaling $503.7 million in that first quarter. The average annual investment for all its products was $38.7 million. Of this, 88% of the investments received came from institutional investors, primarily hedge funds. In the last 12 months, the fund management company turned over $1.07 billion for the first time in its history.

The Grayscale Bitcoin Trust accounts for the majority of the firm’s investment inflow with $388.9 million, according to Grayscale:

Grayscale raised $503.7 million in 1Q20, nearly double the previous quarterly high of $254.8 in 3Q19. New investors accounted for $160.1 million in inflows. Grayscale Bitcoin Trust and Grayscale Ethereum Trust both experienced record quarterly (…)

However, Ethereum has attracted the attention of investors over the past quarter, as the report notes. For the first quarter, Grayscale reported a new record with an investment inflow of $110 million. In comparison, Ethereum has received a total of approximately $90 million in investment inflows over the past two years. In this sense, Ethereum may be at a crucial moment that marks the beginning of an unprecedented institutional investment wave for the cryptocurrency.

Bitcoin BTC Ethereum ETH

Source: https://grayscale.co/insights/grayscale-q1-2020-digital-asset-investment-report/

Overall, Grayscale’s data points to a general increase in investor interest in its products, despite high market volatility and high risk in the global economy, as Grayscale states:

Investors are tactically using drawdowns to increase their exposure to the asset class, even in a ‘riskoff’ environment. Our institutional investor segment also continued to expand, a trend that could gain additional momentum as legacy financial institutions reinforce the investment thesis for the asset class.

As CNF recently reported, Ethereum equalled Bitcoin in terms of daily value transfer, according to a Messari report. The research company attributes the increase in value transfer compared to Bitcoin to the stablecoins. The stablecoin transactions account for 80% of Ethereum’s daily value transfer. Meanwhile, Su Zhu, CEO of Three Arrows Capital, said in an interview that Ethereum could suffer a supply shock if the new EIP-1559 proposal is accepted. The proposal is to burn ETH with every transaction processed. In addition, Zhu also pointed to an increasing interest in Ethereum from Asia.

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About Author

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Reynaldo Marquez has closely followed the growth of Bitcoin and blockchain technology since 2016. He has since worked as a columnist on crypto coins covering advances, falls and rises in the market, bifurcations and developments. He believes that crypto coins and blockchain technology will have a great positive impact on people's lives.

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