The coronavirus pandemic has truly been a watershed event — not just for the financial industry, but for the world at large. Many had plans and goals that they wanted to achieve before the year ran out but had to stop. Companies had to go into bankruptcy, and people lost their jobs in their numbers.
Like every sector of the global economy, the financial sector has also suffered significantly from the effect of the pandemic. We have countries scrambling to keep their economies afloat and people looking for means to stay solvent.
It goes without saying that stock markets and financial institutions across the world are uniquely vulnerable at this point. This is a level of danger that the world has never seen before. Even the depression of 2008 didn’t prepare anyone.
However, one aspect that has so far managed to weather the storm has been the crypto market. While Bitcoin dropped to $3,800 in March, the top cryptocurrency managed to surge in its value and consolidate faster than any other investment vehicle in the world.
The stock market is just beginning to rebound, and alternative assets are still in their everlasting state of volatility. Cryptocurrencies, however, are going strong.
Understanding Crypto Investor Types
When it comes to crypto investors, there are basically two types:
- Retail investors: everyday people looking to purchase cryptocurrencies for several reasons, especially as investments and payment vehicles.
- Institutional investors: High-net-worth individuals and companies looking to make speculations and investments in the assets.
Many can argue about how retail investors have reacted to Bitcoin through the pandemic and bring data to back their facts up. However, institutional demand is much easier to measure.
Thankfully, it appears that institutional demand for Bitcoin — and several other cryptocurrencies — has been at an optimal level.
Asset Management Firms’ Performance
One of the best ways to understand this trend is to look at the volumes of asset management and institutional investment firms. So far, several of them have made significant gains.
Pantera Capital Outdoes Its 2019
This month, Pantera Capital, an asset management firm, revealed in a disclosure form with the Securities and Exchange Commission (SEC) that its Pantera Venture Fund III has raised $164,705,834 to date. The fund, which it launched in 2018, managed to raise $68,841,379 of its cume over the past 12 months.
Pantera’s average investor ticket size also amounted to $1.77 million in that time — more than four times what it was in 2019 and about twice the levels of 2018. As the company explained, that number represented an uptick in interest from institutional investors — its primary market.
Grayscale Adds $1 Billion in AUM Over 11 Days
However, no institutional investment firm did better in the crypto industry than New York-based Grayscale Investments. Grayscale is currently the largest asset management firm in the crypto industry. The company began seeing significant gains last year, when Bitcoin finally broke out of the slump it tool in 2018.
In 2020, however, the company has done even better numbers across the board. Last month, the firm noted in a Twitter update that its total assets under management had risen to $5.1 billion — up by about $1 billion in less than two weeks.
The company noted that it had doubled the assets under management in its Bitcoin Cash trust, moving from $6 million to $12.8 million. Its Bitcoin trust saw the biggest gains, with $782 million added. The Ethereum, Ethereum Classic, and Litecoin trusts saw $174 million, $12.7 million, and $6.7 million added to them as well.
Altogether, Grayscale confirmed that its assets under management clocked $5.2 billion, with Bitcoin alone making up for $4.4 billion of that.
Grayscale credited its growth over an ad blitz that promoted Bitcoin and crypto investments to many. Whether or not that is true, the fact that its numbers have risen so impressively means that institutional investors are seriously considering cryptocurrency investments the more.
Opportunities for Everyone
All of these have pointed to many touting Bitcoin as the most reliable hedge against the coming global recession.
Even outside the United States, companies are capitalizing on the top cryptocurrency more and more.
Tahini’s a Middle-Eastern restaurant based out of Canada, confirmed in a Twitter thread earlier this week that it had moved its entire asset reserve to Bitcoin when the pandemic began.
The restaurant explained that it had seen the Canadian government pump more money into the economy to maintain liquidity and prevent business closures. While they understood the rationale, they also knew its implications.
So far, the move has helped the restaurant. Data from CoinMarketCap shows that Bitcoin rose from $6,720 on March 25 — the day that Canada’s government announced its economic relief plan — to $11,500 on the day Tahini’s tweet came out.
Companies are cashing in on the Bitcoin surge every day. In a world where pretty much every asset has shown vulnerability, this asset class has proven to be reliable.