Grayscale, the digital asset manager which last week revealed its strongest quarterly inflows in a year, believes that a generational shift in investment patterns will drive trillions of dollars into bitcoin in the coming decades.
Barry Silbert, chief executive of the fund manager which reported last week it now has $2.7 billion in assets under management, believes investment in traditional assets such as gold will fall in the coming years as a younger generation of investors include more digital assets in their portfolios.
During its third quarter Grayscale, which manages the flagship Bitcoin Trust Fund, saw its total assets under management triple, thanks to a large increase in institutional investors.
Silbert says in the company’s 2019 Mid-Year Review webinar, that over the last 12 months there has been shake out of the some of the weaker alternatives to bitcoin. He adds that this shake out will help drive bitcoin’s dominance and help it take out the $20,000 highs seen in December 2017.
Bitcoin vs Gold
Silbert likes to compare bitcoin with gold. Indeed, many regulators – including the U.S. Commodity Futures Trading Commission – believe that bitcoin acts more like a commodity than a currency.
He explains that gold is an $8 trillion asset class today, while bitcoin is about $230 billion. But bitcoin is due a greater share as older investors – the Baby Boomer generation born in the 1950s and 60s who favour more traditional assets – pass down their wealth in inheritance to Generation X and Millennial investors.
Over the next couple of decades there’s around $68 trillion of investment in the US alone that’s going to be passed down to these younger generations. He says:
To the Millennial generation gold is seen as the establishment: it's the banks, it's old people. Bitcoin is young and innovative: it's a disruptor. It's an investment in vision and entrepreneurship.
Silbert believes investors are becoming increasingly serious about bitcoin – retail and institutional investors alike.
He describes five phases of bitcoin acceptance: investors are initially “dismissive”, which then mellows into a healthy “skepticism”. They then begin to become “intellectually curious” about the asset class, before becoming “believers” and finally “crypto-evangelists”.
Indeed, last week’s figures showed a near 100% quarterly increase in inflows, with the majority – 84% – coming from institutions such as hedge funds.
Moving forward, Silbert believes the most important event on the horizon will be the launch of the Libra project, headed by Facebook.
We'll look back on the launch of Libra as being just as important for cryptoassets as the launch of Netscape was for the early days of the internet.