Crypto and Institutional exposure
Updated: Feb 6, 2021
Bitcoin had an interesting journey filled with extreme volatility throughout 2020. In early March it dipped below 4000 dollars and at the beginning of January it eclipsed 40000 dollars. Somewhere along this ride Institutions began to take notice.
Grayscale is certainly the biggest player in terms of institutional exposure to cryptocurrency. In 2020 alone, their AUM increased more than tenfold. They reported that in the third quarter, 81% of investments into their Bitcoin Fund were institutional. Much of that 81% was from pension funds looking to track bitcoin with less risk. JPMorgan believes that Grayscale is spending upwards of $1 billion a month on various cryptocurrencies.
Institutions and retail investors aren’t the only groups that are getting involved with crypto. At the beginning of the month, Stellar Development Foundation partnered with the government of Ukraine and made Stellar Lumens their national digital currency. Ukraine believes that virtual assets will play a big part in the future economy.
On the other end of the spectrum, Ripple and two of their executives were sued by the SEC at the close of the year. The SEC claims that they “raised over $1.3 billion through an unregistered, ongoing digital asset securities offering.” They believe that since XRP was never registered, investors did not have access to information relevant for due diligence.
Based on the growth the cryptocurrency market has seen in 2020 and the different players getting involved, I think we will continue to see crypto and traditional investing get closer and closer.