While multiple projects struggled in the crypto crunch, for Grayscale Investments 2018 was the best year they’ve ever had.
In their quarterly report, released on Thursday, Grayscale said that despite declining prices and market conditions in the latter half of the year, investment inflow was at its highest levels since the firm launched more than four years ago.
Grayscale received $30.1M in investment in the last quarter, bringing the total amount for the year as a whole up to $359.5M. This averaged out at $6.9M worth of investment into their products every week; about two-thirds of that, $4.7M per week, went into the group’s Bitcoin Trust.
Although institutional investors continued to represent the largest share of inflows in 2018, Grayscale noticed a considerable increase in the volume of funds coming from retirement funds – up to 40% in the final quarter. The report suggests investors are shifting towards long-term, and that the“average investor at this stage of the bear market is patient with a multi-year investment.”
Described as a “record year for our business,” last year’s total investments were considerably larger than those of previous years. Even with market euphoria, total investments made in 2017 were approximately a third of what they were last year. 2018 inflows were double the amount made in the previous four years combined.
“Despite a deceleration of investment into digital assets in the fourth quarter, Grayscale raised $30.1 million over the last three months, bringing our full year 2018 inflows to $359.5 million,” the report says. “This marks the strongest calendar year inflows since the inception of our business.”
“We [Grayscale] continue to see evidence that digital assets are here to stay as a new asset class.”
Shades of Gray(scale)
Grayscale is the world’s largest digital asset manager. A part of Digital Currency Group (DCG), the venture capital firm which includes news outlet CoinDesk in its portfolio, Grayscale creates investment products based on virtual currencies, targeted both at institutional and retail investors.
The bear market evidently took its toll on Grayscale. Whereas the 2018’s weekly average for investment inflows stood at $6.9M, it was around $2.3M in Q4. Investors were far more interested in products tied to Bitcoin in the last quarter, with $2M – 88% of the total – going into the BTC trust every week.
The report highlights that Grayscale had $825M worth of assets under management (AUM) at the end of the year, with 44% coming from investment inflows in 2018. But drawdowns on AUM also went to their highest since the last bear cycle in 2015, spiking at around 75% in December.
Although Grayscale continued to experience cumulative AUM growth at above 300% throughout most of the year, the rate of increase dropped markedly from 350% to roughly 300% in the last quarter of the year. With the higher volume of drawdowns, total AUM growth was just above the 200% mark by the end of the year.
This suggests that while inflows were consistently positive throughout 2018, they were higher in the first half of the year, compared to the latter half. The noticeable increase in BTC investment compared to other digital tokens suggests that investors remained bullish on cryptocurrencies in general, but many became increasingly cautious about altcoins.
Investors entered 2019 with caution. Despite the report’s sunny optimism, an about-face in market conditions is needed if Grayscale is ever to top their performance in 2018.
The author is invested in digital assets, including BTC which is mentioned in this article.