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Crypto investment firm Grayscale sees 900% jump in assets to $20 billion amid bitcoin frenzy

Mykola Tys/ | LightRocket | Getty Images

Grayscale saw its assets under management skyrocket as Wall Street used it as a proxy to invest in bitcoin.

The New York-based investment firm kicked off last year with $2 billion in assets and ended with more than $20.2 billion. That 900% increase was driven by demand from institutional investors such as hedge funds, endowments and pension funds, the company said in a quarterly report Thursday.

Grayscale's Bitcoin Trust became a popular, publicly traded way for investors to get exposure to cryptocurrency without owning the coins themselves. The investment product ballooned from $1.8 billion to $17.5 billion in assets year over year.

"We saw a meaningful acceleration of institutional participation," said Michael Sonnenshein, who recently took over as CEO of Grayscale Investments. "There's no longer professional risk of investing in the digital currency asset class — there's probably more career risk in not paying attention to it."

Grayscale's banner year came as high-profile money managers publicly warmed up to digital currency.

Billionaire hedge fund manager Paul Tudor Jones called bitcoin the "best inflation hedge" and compared it to putting money behind tech giants like Apple and Google. Stanley Druckenmiller and Bill Miller are among the other high-profile bitcoin bulls. Their backing, analysts say, has given Wall Street more confidence to invest.

Institutions made up 87% of Grayscale's inflows for the full year, the company said. The average size of commitments from those investors doubled in a matter of months. In the third quarter of 2020, investors were putting in roughly $3 million on average, and by the end of last year were committing an average $6.8 million.

Institutional demand has been cited as a key reason for bitcoin topping $40,000 last week and a triple-digit rally last year. Sonnenshein said those professional investors often don't have the...

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