Grayscale: 84% of Q3 Interest Came From Non-Crypto Hedge Funds

Grayscale’s Michael Sonnenshein contends that the asset manager’s recent Form 10 filing with American regulators would be “a milestone” for the crypto industry if it’s approved.

Sonnenshein — managing director at the world’s largest digital asset manager, Grayscale Investments — made his remarks during an interview with CNBC on Nov. 20.

Hedge funds after digital asset exposure

Earlier this week, Grayscale filed a registration statement on Form 10 for its publicly traded Bitcoin (BTC) fund Grayscale Bitcoin Trust (GBTC) with the United States Securities and Exchange Commission (SEC).

If approved, the trust would become the first cryptocurrency investment vehicle to attain the status of a reporting company by the SEC. In his interview with CNBC, Sonnenshein noted the robust institutional interest in cryptocurrency access products. Even just in Q3 2019, he said:

“84% of inflows were from non-crypto hedge funds that want digital asset exposure.”

GBTC has been trading since May 2015 and Sonnenshein noted that “if we just look at the last 3-month trading volume, it’s tripled year-over-year,” regardless of Bitcoin’s performance on the spot markets.

Regarding the significance of the SEC potentially giving the green light to Grayscale’s Form 10 filing, Sonnenshein said:

“You have a lot of companies that want to have exposure to the space, but then you start to ask, who at the company is going to have the keys? Who at the company is going to do the due diligence and the ongoing compliance?”

Aside from compliance benefits, he emphasized the importance of creating a family of products that “look and feel like many of the other instruments these institutions use.”

Halving, not institutions, will drive Bitcoin’s price

The takeaway, he suggested, is that if Form 10 is deemed to be effective, we’ll see for the first time “greater access for institutions who need an SEC reporting company to be able to invest” and “quicker liquidity options, so that investors can divulge their holdings after six, as opposed to twelve, months.”

Regarding any potential impact on Bitcoin’s price, Sonnenshein discarded the institutional investor adoption narrative and emphasized instead Bitcoin’s forthcoming halving — and consequent diminishment of supply — as a factor that has historically shown itself to have a positive impact on the asset’s price.

As reported, Grayscale’s regulatory foray follows a record year for the trust, which saw inflows of $254 million in total investment into its products in the third quarter of 2019.