Grayscale cryptocurrency investment got its first positive returns of the year
Overall investment in the space still seems to be much higher than last year.
The Grayscale investment firm has released its Q3 digital asset investment report (PDF) showing a total of $81.1 million invested in the third quarter of 2018 and an average of $6.2 million per week across all its products. Institutional investors made up 70% of its investors this quarter.
Compared to previous quarters, this is a drop in the total dollar value of investments but there are still seven digits of enthusiasm per week and the proportion of institutional investors making up Grayscale's client base has risen from 56% last quarter to 70% this quarter.
In more detail
These results continue the overall trend of an exceptionally strong year for Grayscale – if not necessarily its investor returns in the year to date – and ongoing demand for cryptocurrency as an asset class. Demand for bitcoin, relative to other digital assets, is also on the rise. Last quarter 63% of the total investments went to bitcoin, while this quarter it was about 75%.
Most distinctly, this is the first quarter all year that Grayscale products have returned positive results, bringing back 12.6% on bitcoin and 21.3% on XRP this quarter, although everything is still down in the year to date.
However, Grayscale has pulled 4,635% returns on its bitcoin investment trust since inception, so dropping 50% for the year to date perhaps isn't so extreme, and judging by the continued investment many speculators aren't too worried.
Bitcoin as an investment asset is defined in part by its potential for asymmetrical returns, which naturally involves shouldering a higher risk of this kind of hemorrhaging. And as Grayscale has previously noted, market forces have an uncanny ability to imbue different asset types with very similar average returns. Cryptocurrency's wild price changes of the last year make it hard to apply these rules on a time frame longer than a few months, but a relaxed market-watcher might assume that the downside potential is cosmically balanced out by the chance of big gains.
While the average investment has declined since the last quarter, Grayscale notes that this is "coinciding with the summer slowdown".
And even if it is slowing down, it's still striking compared to previous years.
"Despite a slight deceleration of investment into digital assets coinciding with the summer slowdown, Grayscale raised $81.1 million over the last three months, bringing our year to date inflows to nearly $330 million. This marks the strongest year-to-date inflows through September that we’ve experienced during any calendar year since the inception of our business," it points out. "For example, through the third quarter of 2016 and 2017 we raised $17.6 million and $25.4 million, respectively. Moreover, it was the fourth highest asset raising quarter since Grayscale has been sponsoring and managing investment products."
Cryptocurrency prices and cash influx might be down since the start of the year, but it's still well up since the start of last year.
Disclosure: At the time of writing the author holds ETH, IOTA, ICX, VET, XLM, BTC, ADA