Crypto asset manager Grayscale reports record inflows despite economic slump

Multi-billion dollar asset manager Grayscale reported the largest quarterly influx of inflows in its history on Thursday, a potential indicator that at least some corners of the investment community have looked to crypto during a tumultuous market period.

The $2.2 billion asset manager offers a series of investment products that provide indirect exposure to cryptocurrency assets. In the first quarter of 2020, Grayscale raised $503.7 million across its family of products, according to its quarterly report.

Grayscale's Bitcoin Trust (GBTC) led the pack with inflows topping $388.9 million. That's approximately double the previous quarter high of $254.8 million raised in the third quarter of 2019.

Grayscale's quarterly inflows are notable given the broader macro backdrop. The end of February saw the start of a coronavirus-triggered market rout that spared few assets. Cryptocurrency markets have not been immune, with bitcoin tumbling as much as 30% by mid-March. Still, inflows into ethereum began to outpace bitcoin following the week ending in March, indicating a shift in investor preference.

Inflows at Grayscale, meanwhile, remained steady up until March 20. A breakdown of weekly inflows across the firm's products suggests a slowing momentum at the end of March. 

Source: Grayscale

Still, Grayscale's Michael Sonnenshein said the firm would "look to continue to build off the momentum."

He said the firm's results indicate an increase in interest among institutional investors in the digital asset space. 

"Inflows came from institutions," he said in an interview. Grayscale's report shows about 90% of inflows since inception came from what it categorizes as institutions, which span hedge funds, crypto-native investors, family offices, and other client types.

Other firms that cater to the institutional crowd supported similar levels of interest. Bitwise Asset Management has seen an uptick in flows and interest, according to chief operating officer Teddy Fusaro.

Fusaro said that independent financial advisors have become more engaged with the company during this period. In a phone interview with The Block, Fusaro said unprecedented financial conditions, including historic levels of Federal Reserve money-printing and aggressive economic stimulus from the U.S. government, are forcing people to rethink their current portfolio makeups. 

"RIAs in normal times are going out into the community and talking to rich lawyers and doctors to grow revenues," he said.

"Now, there's money in motion," Fusaro continued. "People are looking to shift things around."

The interest in crypto products among investors might come as a surprise to certain market observers.