Grayscale Investments’ Q4 report provides valuable insight into digital assets.

The underlying facts are perhaps the most valuable takeaways on crypto adoption from Grayscale’s Digital Asset Investment Report for Q4 of 2020:

• Grayscale, the world’s largest digital asset manager, began the year with $2.0 billion in assets under management (AUM) and ended 2020 with $20.2 billion. That’s an approximately 10x increase.
• Of the total AUM, the Grayscale Bitcoin Trust grew during 2020 from $1.8 billion to $17.5 billion, becoming one of the fastest-growing investment products in the world.
• Grayscale’s 2020 inflow across all products was more than four times the $1.2 billion cumulative inflow during the six years from 2013-2019.

“When the history books are written, 2020 will be noted as a major inflection point for the adoption of Bitcoin, and digital currencies more broadly,” says the report.

Grayscale Q420

The fourth quarter of 2020 was a blockbuster for Grayscale.

• The asset manager nabbed quarterly inflows of $3.3 billion across its various products.
• Institutions, primarily asset managers, accounted for 93% of inflows during the quarter.
• The Q4 inflows of $3.3 billion accounted for more than half of the entire year’s inflow of $5.7 billion.
• Grayscale’s assets under management reached all-time highs during 4Q20 as asset prices rose and capital flowed in from institutions.
• Q4 was the fourth consecutive record-shattering quarter in 2020.
• Grayscale comment: “The monetary and fiscal measures by governments globally served as the catalyst for the surge of interest in bitcoin. As monetary inflation became a pressing concern, institutional investors took action by allocating to bitcoin. In this paradigm, bitcoin took center stage in the market and in our product suite.”
• Grayscale’s bitcoin inflows, as a percentage of mined bitcoin, continued to tread higher. During the quarter, inflows were 194% of mined bitcoin. This contributed to the limited available supply of bitcoin in the market.
• During 2020, the amount of circulating bitcoin under Grayscale management increased from 1.45% to 3.31%. Similarly, the proportion of circulating ethereum managed by Grayscale increased from 0.47% to 2.61% in 2020.

Grayscale’s crystal ball – 2021

• More and more RIA’s will consider fitting bitcoin in their portfolios
• Nation-states may take the lead from institutions and start investing in bitcoin
• Bitcoin rewards, linked to various payment cards, could trigger another source of demand for the crypto
• Bitcoin mining is incentivizing clean energy. Energy companies are now channeling wasted energy into bitcoin mining.
• US banks may look to incorporate digital currencies into their settlement infrastructure. In 2021 we may see the beginning of digital currencies integrating into national banking infrastructures.
• “2020 was the year institutional investors recognized that bitcoin is a viable option for offsetting the abundance of paper money and the cumbersome nature of gold. In a world with over $17 trillion of negative-yielding debt, we believe bitcoin will continue to become a cornerstone of investors’ portfolios in 2021.”

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