Grayscale Subscriptions Reach New Peak

KEY TAKEAWAYS

  • Grayscale set a new high inflow with USD 905.8 million in Q2 2020, with GBTC and ETHE contributions, in line with previous Bybit Insight projections. 
  • Grayscale product demand increased from offshore institutional investors in Q2.
  • Temporary closure of GBTC subscription may have led to recent demand weakness of BTC.

Cryptocurrency asset management fund Grayscale has released its Q2 2020 report. Grayscale Bitcoin (GBTC), Etherium (ETHE) and other crypto investment products peaked at over USD 905.8 million. This is the largest quarterly inflow to date, almost double of its previous quarterly high at USD503.7 million. Grayscale BTC Trust (GBTC) and ETH Trust (ETHE) both experienced record quarterly inflows of USD751.1 million and USD135.2 million respectively, consistent with Bybit Insight’s projections.

Source: Grayscale

The graph above demonstrates that most of the inflow went into Bitcoin, among which 84% came from institutional investors. Although Bitcoin has been trading in narrow ranges of late, it has made a tremendous recovery from the mid-March liquidity crunch, which in no small part is owed to burgeoning institutional support.  

Source: Grayscale

The Grayscale report affirms that Grayscale subscriptions reduced BTC supply, especially since the third Bitcoin halving in May. Capital injections from institutional investors have enabled Grayscale to aggregate more BTC than the total amount mined post-halving. Locking large quantities of BTC in a Grayscale vault certainly reduces the hard supply in circulation.  

Source: Grayscale
Source: Grayscale

Investors in Grayscale’s various digital trust products have seen substantial returns. For USD2.5 billion investment since Grayscale’s inception, the current NAV is around USD4 billion, translating to an overall return of 60% over the seven years. Early investors of crypto had been successfully riding a rising tide, however new investors will need to pivot towards better timings to adapt to the current market stagnation.  

Investors can acquire Grayscale Trust products either through cash contributions or in-kind subscriptions. But Grayscale did not address the queries regarding the in-kind subscription ratio in Q2.

Notably, 60% of investors in Q2 were based offshore. One such investor was Three Arrows Capital, a hedge fund in Singapore, which claimed to hold 6% of GBTC shares. Su Zhu, Co-Founder of the hedge fund, expressed strong bullish sentiment towards GBTC, claiming that inflows drive premium. 

Source: Grayscale

The continuous cash inflow in Q2 driving the prices of BTC and ETH is proof that Grayscale has the capacity to move markets and, thus, deserves more of our attention. Though the temporary closure of BTC and ETH subscription services in early July led to subdued demand for more than ten consecutive trading days, the impact wasn’t as severe as expected. GBTC has resumed subscriptions on July 15, shortly after ETHE resumed its services.  

As investors progressively look for new opportunities to diversify their portfolios amid aggressive monetary and fiscal interventions, Grayscale’s Q2 report provides a clear indicator that attitudes towards digital assets are shifting, and the asset management fund is showing no signs of slowing down Bitcoin and Ethereum purchase at record pace.