New York-based Grayscale, which allows accredited investors to buy bitcoin and other major cryptocurrencies through its funds, recorded inflows of $905.8 million for its second quarter—nearly double the previous quarterly high of $503.7 million in the first three months of this year.
Institutional investors, primarily hedge funds, accounted for 84% of Grayscale bitcoin and cryptocurrency fund investment in the second quarter of 2020, up from 81% for the trailing 12 months. New investors represented 57% of the Grayscale investor base during the quarter, up from 49%—though they only accounted for $124.1 million of the inflow into the Grayscale digital asset products.
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Bitcoin remained Grayscale's most popular asset, accounting for 83% of investment, though Grayscale also reported large interest in alternative cryptocurrencies, with demand for its Ethereum Trust accounting for nearly 15% of total inflows—an all-time quarterly high.
The bitcoin price has been hovering around $9,000 since bitcoin went through its fourth supply cut, known as a halving, in May; however, Grayscale sees the high demand for its bitcoin fund as a potentially "positive" sign.
"With so much inflow to Grayscale Bitcoin Trust relative to newly-mined bitcoin, there is a significant reduction in supply-side pressure, which may be a positive sign for bitcoin price appreciation," Grayscale wrote in its quarterly report, released on Wednesday.
Michael Sonnenshein, Grayscale managing director, was quick to point out those investing in Grayscale's bitcoin fund are not holding bitcoin directly.