Each day it seems the attention given to the cryptocurrency market is increasing at an exponential rate. Over the last few months, we saw a number of larger entities start entering the market, mostly Bitcoin, and buying large amounts.
When I was skimming through the headlines on Coingecko, I came across these two articles. This is showing how things are progressing.
https://beincrypto.com/grayscale-reportedly-stockpiles-another-1-3k-btc-100k-eth-in-24-hrs/
The first one deals with a growing story within the industry.
Grayscale is becoming one of the biggest names in crypto. Using the OTC market, this trust allows retirement and other Wall Street accounts exposure to Bitcoin (and a few other cryptos such as Ethereum).
What is interesting is the purchase of 1,276 Bitcoin over the last 24 hours exceeds the total number mined. Each day, 900 Bitcoin is mined, meaning that Grayscale purchased all the mined tokens PLUS another 376. While they might not have bought from the miners, they did produce a -376 net impact on the day.
This does not include any of the purchases by other entities such as PayPal or any individuals.
Of course, this is only the tip of the iceberg as the second article notes,
Mass Mutual bought $100 million worth of Bitcoin as part of a strategy to diversify its holdings. This is something that we are seeing becoming common place.
The vital thing to note is this is an entirely new situation. Mass Mutual is an insurance company that is more than 150 years old. It also has $225 billion in its investment account. The $100 million is likely just the starting point.
If this company were to allocate 1% to Bitcoin, that would be $2.25 billion. That means it has another $2.15 billion to allocate before it reaches that level.
Insurance companies are some of the richest in the world, sitting on trillions of dollars. These are not hedge funds which is apt to be a bit more aggressive. Instead, insurance companies are known to be some of the most conservative investors there are. Yet, here is one of best known in the United States putting $100 million into Bitcoin.
To provide an idea of how "boring" these companies can be, insurance companies are a favorite of Warren Buffett. He is not known for investing in companies that tend to be overly aggressive with their funds.
We are only at the beginning of this trend. The numbers are now in the hundreds of millions of dollars. However, they will not stay there for too long. If this trend keeps going, we will start to see the numbers jump into the billions. Insurance companies are able to enter with that size while still not reaching 1% of their holdings.
At the same time, some of the larger Wall Street fund are sitting on trillions. This puts their capability into the tens of billions. Here we see numbers that dwarf the hundred million that Mass Mutual entered with.
As we see from the Grayscale article, Bitcoin is not the only one enjoying the focus of these major money players.
That company's one day buy in Ethereum is more than half a billion dollars. This is a healthy number for an asset with a market cap of $62 billion.
The fund is presently trading at over 120% of the underlying asset price, meaning the premium is huge. This is down, however, from over 800% when the fund opened.
Perhaps, as the popularity of the fund grows, we will see the premium drop.
Whatever the outcome with this particular fund, it will not be the only game in town. This will end up causing more buying pressure on some of the top cryptocurrency.
Bitwise already announced its crypto index fund that buys 10 different cryptocurrencies, while also trading OTC. This is similar to Grayscale except that it targets a number of tokens other than Bitcoin.
That fund opened up with $100 million, the same number as Mass Mutual. Again, this is only the beginning for this one also.
Within the next 12 months, we can expect a lot more activity out of these segments. This flow of funds is only going to grow.
It is hard to project how much impact this will have on the entire industry.
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