The cryptocurrency market has long been navigating a prolonged bear cycle, with limited momentum in the existing investor base. As a result, hopes for a market rebound—and broader industry expansion—have increasingly centered on institutional adoption. Among the most influential players driving this shift, Grayscale Investments stands out as a pivotal force.
Established in 2013 as a subsidiary of Digital Currency Group (DCG), Grayscale offers regulated investment vehicles that allow traditional and institutional investors to gain exposure to digital assets through trusts. With over $2.1 billion in assets under management (AUM)—and more than 90% of that capital coming from institutions and retirement funds—Grayscale has solidified its position as the world’s largest digital asset manager.
If legacy capital (often referred to as "Old Money") is going to enter the crypto space, Grayscale is likely to be its first point of contact. As 2019 came to a close, what progress had Grayscale made? And what does this mean for the future of institutional inflows in 2020?
The Institutional Whale That Keeps Buying
Grayscale has long maintained a conservative investment approach, focusing exclusively on established cryptocurrencies. Its portfolio is dominated by nine major digital assets, including:
- Bitcoin (BTC)
- Ethereum (ETH)
- XRP
- Bitcoin Cash (BCH)
- Litecoin (LTC)
- Stellar (XLM)
- Ethereum Classic (ETC)
- Zcash (ZEC)
- Horizen (ZEN)
Despite widespread market pessimism at the start of 2019, Grayscale remained bullish. The firm publicly stated that a new bull cycle was forming—one led not by retail traders, but by institutional investors positioning themselves for long-term growth.
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Their confidence wasn't just talk. Over the year, Grayscale aggressively expanded its holdings. Assets under management surged from $825 million at the end of 2018** to **$2.1 billion by December 4, 2019. This growth made Grayscale the largest institutional holder of Bitcoin, with over 260,000 BTC in custody.
Here’s a breakdown of Grayscale’s trust fund performance in 2019:
- BTC Trust: $1.927 billion (up nearly 300% from under $800 million in Q1)
- ETH Trust: $72.1 million
- BCH Trust: $3.4 million
- ETC Trust: $33 million
- LTC Trust: $400,000
- XRP Trust: $3.2 million
- XLM Trust: $300,000
- Zcash Trust: $4.5 million
- Horizen (ZEN) Trust: $1.9 million
While some of this growth can be attributed to rising asset prices, the volume of new capital inflows tells a more compelling story. Even during market downturns in the second half of 2019, Grayscale saw a threefold increase in quarterly inflows. In Q3 alone, it attracted $255 million, a 300% year-over-year increase and nearly 27% of all historical inflows since inception.
This sustained institutional interest signals strong conviction in crypto’s long-term value—a trend that could accelerate in 2020.
Why Crypto Needs Better On-Ramps
Grayscale isn’t just an investor; it’s also building infrastructure for mainstream adoption. As one of the few SEC-compliant crypto investment trusts, it simplifies access for institutions wary of custody risks, regulatory uncertainty, or technical complexity.
In November 2019, Grayscale took a major step forward by filing Form 10 with the U.S. Securities and Exchange Commission (SEC). If approved within 60 days, this would grant its funds “reporting company” status—the first for any digital asset investment vehicle.
This change could be transformative:
- Broader investor eligibility (including those restricted from unregistered securities)
- Reduced holding period from one year to six months before shares can be sold
- Increased liquidity and transparency
Even so, Grayscale’s scale remains small relative to global financial markets. At its peak in late 2017, Grayscale managed $3.5 billion—impressive until you consider that the total crypto market cap was around **$190 billion in December 2019 (with Bitcoin accounting for about $132 billion). That’s less than the market value of Tencent or Tesla**, let alone giants like Apple or Microsoft.
Compared to gold—valued at $7–8 trillion—cryptocurrencies still represent a tiny fraction of global store-of-value assets. Given that gold makes up less than 1% of global wealth, the potential for digital assets is enormous—if the infrastructure can keep pace.
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Key Catalysts for 2020: ETFs, Bakkt, and Derivatives
Several developments could act as catalysts for broader institutional adoption in 2020.
1. The Final Push for a Bitcoin ETF?
For years, the crypto community has waited for a spot Bitcoin ETF approval from the SEC. Each rejection has been met with disappointment—but momentum may finally be shifting.
In September 2019, SEC Chairman Jay Clayton said publicly: “We are closer to a Bitcoin ETF than ever before.” With multiple applications under review and improved market structure, 2020 could be the last “next year” for ETF hopes.
Approval would open the floodgates for retirement accounts, mutual funds, and pension plans to invest directly in Bitcoin—potentially unlocking trillions in dormant capital.
2. Bakkt: From Slow Start to Steady Growth
Launched in September 2019, Bakkt—the physically settled Bitcoin futures platform backed by ICE (NYSE owner)—had a rocky beginning. Its first day saw only 71 BTC traded, and early volumes were underwhelming.
But by late November, daily trading surged past 5,000 BTC, representing over $42 million in volume—a more than 100x increase from initial levels.
Though still modest compared to CME or derivatives markets on crypto-native exchanges, Bakkt’s growth shows increasing institutional confidence in regulated futures products.
3. Expansion of Derivatives Ecosystem
Bakkt launched Bitcoin options on December 9, 2019, while CME announced plans to introduce Bitcoin options in January 2020. These tools allow sophisticated risk management strategies—essential for large-scale asset managers.
The expansion of regulated derivatives markets marks a maturation phase for crypto finance, aligning it more closely with traditional financial systems.
Frequently Asked Questions
Q: Who owns Grayscale Investments?
A: Grayscale is a wholly-owned subsidiary of Digital Currency Group (DCG), a leading crypto-focused venture firm founded in 2015.
Q: Can individual investors buy Grayscale trusts?
A: Yes, though most products are initially restricted to accredited investors. Some trusts, like GBTC, later become available over-the-counter (OTC), but trade at premiums due to lock-up periods.
Q: Is Grayscale profitable?
A: Grayscale generates revenue through management fees (e.g., 2% annually on GBTC) and placement fees. Its business model benefits from both AUM growth and investor demand.
Q: Why doesn’t Grayscale offer an ETF?
A: It currently operates as a private trust because no spot Bitcoin ETF has been approved by the SEC. Once approved, Grayscale has indicated it would convert GBTC into an ETF.
Q: How does Grayscale store its crypto?
A: All digital assets are held in cold storage with third-party custodians like Coinbase Custody and BitGo, ensuring high security standards.
Q: Does Grayscale influence Bitcoin price?
A: Indirectly. By consistently buying and holding large amounts of BTC without selling pressure, Grayscale contributes to supply scarcity—a bullish dynamic in market cycles.
The stage is set for a pivotal year. With Grayscale expanding access, regulators inching forward, and new financial instruments launching, 2020 could mark the true beginning of institutional crypto adoption.
As infrastructure improves and trust grows, the gap between traditional finance and digital assets continues to narrow—ushering in a new era of investment possibility.