Grayscale Investments, which is one of the biggest and most reputable venues for institutional crypto investors, has reported a record $905.8 million of investments during the 2nd quarter of 2020. This is a drastic jump from its previous record high of $503.7 million in Q1 2020, and this is a strong indication that institutional investment into crypto is increasing.
For years there has been speculation in the crypto space that institutional investment, meaning investment from corporations, hedge funds, and very wealthy individuals, would bring about the next big crypto rally.
Institutional investment into crypto has indeed been building for a long time, but the numbers from Grayscale this quarter suggest that there is a major acceleration of institutional investment. This could help drive a major crypto rally this year, especially in combination with the upward pressure from market supply being slashed by the May block halving.
Indeed, $905 million of investment in a quarter is actually a big deal considering the relatively small size of the crypto space. The total liquidity of the crypto space is perhaps around $1 billion, and maybe even less, so $905 of investments via Grayscale is actually a major force that is propping up the market.
Diving deeper into the data, institutional investors mostly put their money into Bitcoin (BTC), with 82.92% of Grayscale’s Q2 investments being Bitcoin (BTC) investments, equivalent to $751.1 million.
This is likely because Bitcoin (BTC) is considered the ‘gold standard’ of the crypto space, since it is by far the most widely adopted crypto, and it has the strongest reputation. Further, Bitcoin (BTC) is less volatile than other cryptocurrencies, and institutional investors generally avoid volatility as much as they can.
That being said, 81.1% of Grayscale institutional investors are putting some money into altcoins as well, with Ethereum (ETH), Zcash (ZEC), and Stellar (XLM) leading the pack.
On a final note, the continuing global economic crisis due to the Coronavirus Pandemic could drive institutional investors to diversify into crypto at an increasing rate, especially if stocks crash again, so the promising Q2 numbers from Grayscale could just be the beginning of the long anticipated rush of institutional investors into crypto.