As the cryptocurrency market navigated a prolonged downturn in 2019, hopes for recovery and future growth increasingly hinged on the participation of mainstream investors and institutional capital. Among the key players anticipated to drive this shift, Grayscale Investments stood out as a particularly significant force.
Established in 2013 as a subsidiary of Digital Currency Group (DCG), Grayscale offers compliant investment channels through its trust funds. With assets under management (AUM) surpassing $2.1 billion, and more than 90% of its funding originating from institutional investors and retirement funds, it has solidified its position as the world’s largest digital asset manager.
This has led many in the market to suggest that if "Old Money" — referring to inherited or traditionally managed wealth — were to ever embrace Bitcoin and other digital assets, Grayscale would likely be its preferred partner. So what exactly did this "institutional-friendly" giant accomplish by the end of 2019? More importantly, what might its movements suggest about the prospects of new capital entering the digital currency market in the coming year?
The “Crypto Whale” Continues To Accumulate
Grayscale has maintained a consistently conservative investment strategy, focusing only on mainstream and established cryptocurrencies. Its single-asset trust products, which account for 99% of its holdings, include nine major digital assets: BTC, ETH, XRP, BCH, LTC, XLM, ETC, ZEN (Horizen), and Zcash.
Even during the bleakest moments of the 2019 market, Grayscale remained optimistic. Early in the year, the firm declared that the next bull market was already brewing and would be led by institutional investors, stating, "many institutional investors believe current conditions are favorable for entry, and their presence in crypto assets will only grow."
Backing these words with action, Grayscale significantly increased its holdings throughout the year. Its total AUM soared from $825 million in December 2018 to $2.1 billion by December 4, 2019. With ownership of approximately 260,000 BTC, it became the largest institutional holder of Bitcoin globally.
Throughout 2019, Grayscale consistently expanded its holdings across all major crypto assets:
- Bitcoin Trust: Grew to $1.927 billion, up nearly 300% from under $800 million in Q1.
- Ethereum Trust: Reached $72.1 million.
- Bitcoin Cash Trust: Totaled $3.4 million.
- Ethereum Classic Trust: Amounted to $33 million.
- Litecoin Trust: Stood at $4 million.
- XRP Trust: Reached $3.2 million.
- Stellar Trust: Totaled $3 million.
- Zcash Trust: Amounted to $4.5 million.
- Horizen Trust: Reached $1.9 million.
While part of this growth can be attributed to the market recovery in early 2019, the continuous expansion in the total volume of assets under management clearly reflects strong interest and accumulation by institutional players — even during periods of price decline.
In fact, despite a general market downturn in the latter half of the year, Grayscale’s investment inflows tripled quarter-over-quarter. The third quarter of 2019 alone saw $255 million in new investments, a 300% increase from the same period in 2018. This single quarter accounted for almost 27% of the total cumulative inflows into all Grayscale products since their inception.
This persistent institutional interest throughout a prolonged crypto winter offers a hopeful glimpse into the future. The year 2025 is shaping up to be a promising one, and a critical test for digital asset management services worldwide.
The Challenge of “On-Ramp” Infrastructure for Crypto
As one of the very few compliant cryptocurrency trust funds, Grayscale has spent the past six years simplifying access for mainstream and institutional investors. Its products allow investors to gain exposure to cryptocurrencies without dealing with the complexities and risks of direct ownership, such as storage and security.
The company is also continuously pushing regulatory boundaries. According to its official announcement on November 19, Grayscale submitted a Form 10 registration statement to the U.S. Securities and Exchange Commission (SEC). The goal is to make its dedicated cryptocurrency funds accessible to a broader range of investors.
If approved within the standard 60-day review window, Grayscale’s trust funds would become the first digital currency investment vehicles to obtain reporting company status with the SEC. This would open the door for many mainstream investors and institutions that are either hesitant or legally prohibited from investing in non-SEC reported products.
Furthermore, upon effective registration, the mandatory holding period for shares of the trust would be reduced from one year to six months. This improved liquidity would make the investment proposition significantly more attractive.
Despite holding roughly 1.3% of all Bitcoin in circulation, continuously accumulating major assets, and striving to create more accessible investment products, Grayscale’s efforts alone are not enough to meet potential demand. Even if it were to regain its December 2017 peak AUM of $3.5 billion, this would still represent just a drop in the bucket compared to the potential size of the crypto market and the sheer volume of institutional capital waiting on the sidelines.
Data from CoinMarketCap shows that the total cryptocurrency market capitalization stood at just $190 billion as of December 5, 2019, with Bitcoin accounting for $132 billion (69%). The entire industry’s value was less than that of a single traditional company like Kweichow Moutai ($200 billion at the time), let alone tech giants like Apple or Microsoft, each valued in the trillions.
Even gold, the asset Bitcoin is often compared to, boasts a market valuation of $7–8 trillion — over ten times that of the entire crypto market. And gold itself represents less than 1% of global wealth. This stark contrast highlights a significant gap: the current infrastructure supporting digital asset investment is still vastly underdeveloped relative to the scale of potential institutional demand.
The old adage, "to get rich, first build roads," is highly relevant to the current state of the cryptocurrency market. The year 2025 will be pivotal for institutional adoption. To welcome the vast ocean of external capital, building robust and compliant "on-ramp infrastructure" is one of the most urgent tasks at hand.
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Early Signs of a Major Shift
The landscape is, however, gradually changing. The industry was stirred in 2019 by Facebook’s proposal for Libra, the accelerated development of central bank digital currencies (CBDCs) by various nations, and the increasing legitimization of blockchain technology. Global interest in crypto assets is rising, and the channels for institutional investment are steadily improving.
Bitcoin ETF Approval Could Be Imminent
The long-anticipated Bitcoin Exchange-Traded Fund (ETF), seemingly always "coming next year," has suffered repeated rejections from the SEC. Yet, it appears closer than ever to becoming a reality. In a September interview with CNBC, SEC Chairman Jay Clayton stated, "We are closer to a Bitcoin ETF." Many analysts believe that 2025 could finally be the year it gets approved.
A approved Bitcoin ETF would fundamentally simplify the process for traditional investors to gain exposure to cryptocurrency, potentially leading to widespread acceptance on Wall Street and legitimizing crypto as an asset class for a much broader audience.
Bakkt: The “Super Bull Engine” Is Warming Up
Bakkt, the physically-settled Bitcoin futures platform launched on September 23, had an underwhelming start. In its first 24 hours, it traded just 71 Bitcoin futures contracts. Trading remained subdued for the first nine days, with only 865 contracts changing hands.
However, recent activity suggests a significant turnaround. Daily volumes have climbed steadily, with a notable peak on November 27 exceeding 5,000 BTC, representing a value of approximately $42.5 million. This represents a growth of over 100 times from its initial low, indicating that the so-called "super bull engine" may finally be starting up.
New Derivatives Products Are Launching
The infrastructure for crypto derivatives is expanding rapidly. Bakkt launched its Bitcoin options product on December 9, and the CME Group announced details for its own Bitcoin options contracts, which went live on January 13, 2020. These new products are crucial steps in building a mature and sophisticated financial ecosystem for digital assets.
Significant change often begins with subtle shifts. The underlying momentum and institutional interest evident throughout the 2019 market winter set the stage for 2025 to be a potential turning point for the entire digital asset industry.
Frequently Asked Questions
What is Grayscale Investments?
Grayscale Investments is a digital asset management firm that offers a suite of cryptocurrency investment trusts. It provides institutional and accredited investors with a secure and compliant way to gain exposure to major cryptocurrencies like Bitcoin and Ethereum without the need to directly purchase, store, or secure the digital assets themselves.
Why is institutional investment important for cryptocurrency?
Institutional investment is viewed as a key driver for the next major phase of growth in the crypto market. It brings significant capital, increased liquidity, enhanced regulatory clarity, and greater mainstream legitimacy. The participation of large funds, banks, and public companies can help stabilize the market and reduce its characteristic volatility.
What is the significance of a Bitcoin ETF?
A Bitcoin ETF would be a landmark financial product traded on traditional stock exchanges. It would allow everyday investors to buy shares that track the price of Bitcoin through their regular brokerage accounts, making it far easier and more familiar than dealing with cryptocurrency exchanges. Its approval is seen as a major step towards full institutional adoption.
How does Bakkt differ from other crypto futures exchanges?
Unlike many other futures platforms that settle contracts in cash, Bakkt’s futures contracts are physically delivered. This means that upon contract expiration, the buyer actually receives Bitcoin, rather than its cash equivalent. This model creates direct buying pressure on the underlying asset and is considered by many to be a more authentic and impactful market instrument.
What does "on-ramp infrastructure" mean in crypto?
"On-ramp infrastructure" refers to the systems, services, and financial products that allow traditional fiat currency (like USD or EUR) to be easily and compliantly converted into digital assets. This includes trusted exchanges, regulated brokerage services, custody solutions, and investment vehicles like trusts and ETFs that meet regulatory standards for institutional investors.
Were Grayscale's 2019 predictions about institutional investment accurate?
Yes, Grayscale's 2019 assessment proved largely accurate. Its own record inflows from institutions throughout the year, even during market downturns, demonstrated sustained and growing interest from that sector. This trend has continued to accelerate in the years since, validating the firm's early optimism.