Cryptocurrency asset management firm Grayscale reported that investors poured $81 million into its investment offerings, putting the YTD flows at $330 million. This represents a multifold increase in inflows from the $21 million in inflows for the first three quarters in 2017. Grayscale’s strong fund inflows, besides the many positive updates on institutional involvement, here points to a secular increase in institutional crypto involvement, despite the protracted bear market of the last two quarters. While Grayscale launched three funds this year to support investments in Litecoin, Ripple and Zencoin, Bitcoin remains the biggest recipient, accounting for over 73% of all inflows. Additionally, Morgan Stanley’s recent research report on cryptocurrencies also stated that crypto is becoming an “institutional asset class.” This is a welcoming sign for crypto investors who can now hope to put the painful bear market behind them. Most every institution will eventually allocate a portion of their wealth to this truly differentiated asset class, now that institutional standard-setter Yale has set the ball rolling. With the custody puzzle also close to being solved, focus will now shift more and more towards regulation alone. Regulation remains ambiguous and could well be the final frontier that crypto needs to cross but regulators will take some time to arrive at any sort of preliminary clarity, let alone steady state evolutionary equilibrium like the one that exists in traditional financial markets.
The fact remains that the vast majority of ICOs we have seen in recent times have basically been scams. Also as with most late stage investment cycles, retail investors have been the ones left holding the can. Caution from regulators is therefore justified.