Grayscale Reports 'Slow' Business During Q4 2018, Company Still Raises $30.1 Million

Digital Currency Group subsidiary, Grayscale Investments reportedly raised $30.1 million during the last quarter of 2018.

The New York-based investment company had raised a record $95.4 million during the same time period in 2017. Commenting on the considerable decline in the amount of funds Grayscale’s investment packages have attracted, Michael Sonnenshein, the firm’s managing director, told The Block he was not surprised about Grayscale’s performance during Q4 2018.

Sonnenshein, a former associate at JPMorgan and (also previously an) analyst at the Bank of America and Barclays, said the last three months of 2018 were a “little bit slower” - as expected. During Q3 2018, Grayscale managed to raise significantly more funds as the digital asset investment firm received $81.1 million in inflows.

Attributing the decline in investments made in the final quarter of 2018 to “seasonal challenges”, Sonnenshein said he was still confident as Grayscale’s full-year inflows were valued at a substantial $359.5 million. Notably, Sonnenshein revealed that Grayscale’s overall performance for FY 2018 was its strongest, or best, since the firm was established in 2013.

"Majority" Of Clients Prefer Bitcoin (BTC)

According to Grayscale’s asset managers, 50% of the firm’s total inflows in Q4 2018 were from institutional investors who were mostly based in the US. A large percentage of the cryptoasset investment firm’s clients are also retirees, the company revealed.

Despite the sharp decline in bitcoin’s (BTC) price - after recording all-time highs of nearly $20,000 in late 2017 to currently trading at around $3,500, “the majority” of Grayscale’s inflows have been in bitcoin-related investments. Most of Grayscale’s clients prefer to invest in the company’s “passive" Bitcoin Trust, while limited investments are made in altcoins products such as the Bitcoin Cash Trust, Sonnenshein said.

Explaining why most investors continue to prefer bitcoin-related investments, Grayscale’s managing director noted “that’s where investors have spent the most time, hence they’re most comfortable with that asset.” Significantly more investors trust bitcoin over other cryptos because the flagship cryptocurrency has “overcome so much adversity”, Sonnenshein added.

Recently, Barry Silbert, the CEO of the Digital Currency Group (Grayscale’s parent company), had remarked that “bitcoin is king.”

DCG: Involved In 110 Crypto-Related Businesses

Silbert’s comments came during an interview with CNBC - during which he predicted that most “digital tokens” would “go to zero.” Having worked extensively as an investment banker, Silbert is notably one of the earliest and most active investors in the cryptoasset industry.

Established in 2015, the Digital Currency Group (DCG) is focused on "building and supporting the largest early stage investment portfolio in the digital currency and blockchain ecosystem."

DCG is reportedly involved in 110 crypto-related businesses in 30 different countries. Some of the crypto and blockchain firms DCG has invested in include Abra, BitPay, BitPesa, Blockchain, Blockstream, Brave, Chainalysis, Circle, Coinbase, Kraken, Ledger, Ripple, and Xapo.

50% of Bitcoin Wealth Held by Just 1,800 Wallets

Neil Dennis

The distribution of bitcoin and cryptocurrency wealth is more concentrated than global wealth - and always has been - according to new research.

Blockchain monitoring platform PARISQ says that bitcoin is almost 50 times more concentrated in the hands of the few than global wealth. Ether's distribution, meanwhile, is 300 times more concentrated.

This means, according ot research shared with CryptoGlobe, that to enter the top 50% of bitcoin wealth, a person would need to own 347 bitcoins - worth at current prices $3.6 million. This 50% of bitcoin wealth is controlled by 0.023% of wallet addresses. By comparison, 50.1% of global wealth is controlled by 1% of the world's population.

PARSIQ dataSource: PARISQ

PARISQ's research shows that 1,805 wallet addresses control half of all bitcoins in circulation. Expanded to the top five cryptocurrencies by market capitalization, just 6,457 individual wallets addresses control all assets.

Whale Wallets

The largest such holders of cryptocurrency - particuarly bitcoin - are know colloquially as "whales", and with such concentrated holdings of assets by relatively few investors raises the danger of price volatility should any whale decide to sell a large slice of their holdings.

Such large transactions are often completed undercover - perhaps by special arrangement with crypto exchanges - so that prices remain relatively stable. It is the goal of any trader, however, to buy low and sell high, and it remains totally within the whale's power to manipulate the market in its favour. Such strategies are the staple diets of hedge funds.

It is thought the major holders of this concentration of bitcoin and crypto wealth are founders, early adopters and institutions such as hedge funds and investment houses.

Indeed, PARISQ's co-founder Andre Kalinowski said:

Cryptocurrencies were created with the desire to create a more egalitarian society away from government manipulation and centralized control. However, the latest research has found that cryptocurrency wealth is controlled by a small number of early adopter and exchange-owned whale wallets.

Monitoring Manipulation

Among the top five cryptocurrencies by market cap, XRP is the most concentrated, with just 14 wallets controlling 50% of the market. Ether comes next with 50% of all digital tokens held by 346 wallets.

The research found that much hadn't changed in years. Kalinowski added that although mass media interest during the crypto-market's peak between December 2017-February 2018 brought significant interest from retail investors, very little has changed under the surface. The whales still hold cryptocurrencies long-term and still have the ability to move the markets. He concluded:

The fact is, the transparency that’s part of the DNA of cryptocurrencies has been clouded by the size and complexity involved in analysing these cryptocurrencies. It’s time to open up the blockchain to everyone, to encourage fairer wealth distribution, or at least ensure the whales are more accountable through better monitoring.