Return of the Bitcoin Maximalist? Crypto Winter Luring Even More Institutional Capital than Before
Bitcoin’s price crept higher on Saturday, as the leading digital currency found renewed support near $3,600 following a week of mostly tepid moves. Although the bear market is showing little signs of letting up, Grayscale has declared the return of the ‘bitcoin maximalist’ following a dramatic surge in investments during the fourth quarter. Could this mean that the worst of the downturn has passed?
Return of the Bitcoin Maximalist
Grayscale, the cryptocurrency asset manager most famous for the GBTC Bitcoin Trust, saw an influx of investment capital during the fourth quarter of 2018 – a period known simply as ‘crypto winter’ or ‘crypto nuclear winter,’ depending on who you ask. During the quarter, the Grayscale Bitcoin Trust brought in an average of $2 million per week, the company said in its most recent quarterly report. The number dwarfs the average weekly investment for all other cryptoassets, which stood at just $300,000.
The sheer dominance of bitcoin relative to its altcoin peers led Grayscale to declare the “return of the bitcoin maximalist.” Bitcoin attracted “the most capital within the Grayscale family of products despite further price declines in the digital asset market,” the manager said. “In the fourth quarter, 88% of inflows were into Grayscale Bitcoin Trust, while 12% were into products tied to other digital assets.”
Total investment into Grayscale products reached $359.5 million in all of 2018. The average weekly investment for all products stood at $6.9 million, with the Bitcoin Trust attracting $4.7 million of that total.
Profound Shift Underway?
The shift from retail to institutional investor was also highlighted in the quarterly report. Two-thirds (66%) of the total funds invested during the year came from the institutional investor class. A deeper dive into the investor profiles reveled that 40% of the total amount invested in the fourth quarter came from retirement accounts.
These data points – the rise of the institutional investor and the influx of retirement savers into the digital currency space – reinforce two important trends: (1) the average bear-market investor is patient (i.e., they have a multi-year time horizon); and (2) institutions are building strategic positions in crypto, having used the 2018 downtrend to bolster their positions.
Interestingly enough, it was just last week that Morgan Creek Digital, a leading crypto asset manager, announced that two pension plans became anchor investors in a $40 million venture-capital fund. In other words, retirement planners are beginning to view crypto as a long-term investment vehicle.
Nowhere is this more apparent than in Virginia, which is where the two pension plans are located. Combined, they accounted for $21 million of the $40 million invested into Morgan Creek Digital’s fund. More on this story: Virginia Police Department Reveals Why its Pension Fund is Betting on Bitcoin.
Bitcoin clawed back above $3,600 on most major exchanges Saturday even as trade volumes declined. The bitcoin price rose 1% to $3,603.76 on Bitfinex, where it was in close proximity to the 50-day moving average. A clean break above this level could generate sustained bids for the digital currency as it attempts to carve out a higher trading range. The relative strength index (RSI) shows the price has positive momentum, based on the daily chart.
At current values, bitcoin has a total market capitalization of $63.8 billion. That accounts for 52.6% of the overall market. The combined market cap of all assets was $121.2 billion, according to CoinMarketCap.
Disclaimer: The author owns Bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.
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