New York-based crypto fund provider Grayscale manages the fastest-growing financial product in the world with its Bitcoin ETF. CEO Michael Sonnenshein exclusively gives the reasons why cryptocurrencies have a great future ahead of them.
If bank managers have scapegoated regulators in recent years, the crypto finance scene is now the opposite: oversight of crypto markets, currencies, providers and products has proven to be a boon for the fledgling industry.
Similarly, the ongoing expansionary monetary policies of central banks are driving investors into bitcoin.
Enthused by Regulators
Few others sit in a better vantage point for these observations than Michael Sonnenshein. He is the CEO of Grayscale, a U.S. firm that offers the largest bitcoin as well as Ethereum ETFs. Sonnenshein was a guest at this year's Crypto Finance Conference St. Moritz, which for well-known reasons could only take place virtually.
The advancing regulation is extremely positive for the further shaping of crypto markets, said the Grayscale CEO: «We are excited about the regulators and their work,» he actually said.
There's certainly another reason for the enthusiasm at Grayscale: the company, which was founded in 2013, has seen some downright scary growth over the past year: Volume in the bitcoin ETF grew from $2 billion to $20 billion, and another $2 billion flowed into the fund in the first weeks of January 2021. In total, Grayscale now manages $28 billion.
From 60 Million to 28 Billion
«Massive inflows – massive increase in participation in crypto markets,» Sonnenshein summarized in 2020. He took the CEO post at Grayscale just earlier this year, replacing founder Barry Silbert. Sonnenshein was formerly an associate at J.P. Morgan and later an analyst at Barclays before joining Grayscale in 2014. At the time, the firm managed $60 million worth of bitcoin.
If there is currently a lot of talk about a speculative bubble again after the massive price increase of Bitcoin and some banks like UBS still act as a warner that such an investment could prove worthless, Sonnenshein showed a reality that rather points to the opposite of a complete price collapse.
Inflows Also From Switzerland
Almost 90 percent of the inflows last year came from institutional investors, mainly hedge funds. In response to a question from finews.ch, Sonnenshein said Grayscale also gained a number of institutional clients from Switzerland.
The investments of U.S. insurance giant Massmutual, which bought Bitcoin for $100 million, and that of IT consultant MicroStrategy, which invested $250 million worth of Bitcoin as a reserve, were sensational.
Sonnenshein said he is convinced this trend will continue in the current economic and monetary environment. He said he expects pension funds to follow suit and national financial authorities to invest more in cryptocurrencies as well.
Demand From Asset Managers
U.S. wealth managers also represent a huge market potential for Grayscale, Sonnenshein said. Demand for Bitcoin & Co. is only now beginning to be felt from financial advisers, he said. And since Paypal began accepting bitcoin as a payment method last year, other payment service providers are likely to follow soon.
The fundamental drivers of bitcoin remain intact anyway, Sonnenshein said. These include a monetary policy that continues to devalue fiat currencies and the further shaping of the markets by the regulators mentioned at the beginning of this article.
Reversal of Risks
Sonnenshein also addressed the objection that for asset managers, recommending cryptocurrencies as an investment is a career risk because volatility and risk are too high. «The risks are decreasing,» Sonnenshein emphasized, «a career risk today is probably more not to recommend cryptocurrencies,» he noted.
