Late in 2020, Europe’s leading Bitcoin fund CoinShares achieved record flows. The firm is part of the first group of companies for institutional investment in Bitcoin.
In recent weeks, CoinShares announced that it reached a total managed number of assets of USD 34.5 billion. The largest Bitcoin fund in Europe said that it was able to do it due to the growing institutional demand for its Bitcoin funds.
According to CoinShares chief strategy officer Meltem Demirors, they expect that there will be volatility and cyclical movements for Bitcoin. However, she predicted that the trend will continue to rise this year. She argued that this will happen “simply because there is not enough Bitcoin to meet the massive demand,” reported The Economic Times.
Demirors believes that “Bitcoin is a technology and networking infrastructure whose growth resembles that of a social movement.” She says that this kind of group might aim to create and resist change. The main cryptocurrency of the market “introduced a new idea when the world needed it most: the separation of state and money.” She highlighted that it proposed that money could be digital, scarce, immutable, and open-source.
The latest CoinShares weekly report indicates incoming flows of USD 26 million in the first week of the year. This represents a significant drop compared to the record of flows of USD 1,090 million that they had obtained the week before Christmas 2020.
They attributed the decrease in flow rate to many traders and investment advisers’ decision to take that week off.
The European Bitcoin fund shows in a graph that the total flow for December, including the record week, exceeds USD 1.8 billion. There has been a massive flow of investors into Bitcoin in the last year, Demirors noted. This has contributed to the growing demand for Bitcoin and other cryptocurrencies, as well as a bullish price momentum, in recent months.
Why Institutional Investments in Bitcoin are Important
Concerning the price corrections in a bullish cycle, Meltem Demirors states that volatility “is part of the story.” The executive highlights that the market prefers long positions due to the rapid rise in prices. However, she explains that market participants will want to achieve some profit at some point.
“Some institutions do not want to allocate between USD 10 million and USD 30 million to Bitcoin. They would rather put between USD 100 million and USD 500 million, or even USD 1 billion, into a single investment. I do think that there will be volatility and cyclicality this year, but the trend will continue to be upward. This is a question of supply and demand. There is simply not enough Bitcoin to meet the huge wave of demand that we face,” said CoinShares chief strategy officer.
Demirors says that it is difficult for portfolio managers to optimize the return on their investments. Interest rates are close to zero, and traditional stocks are not performing as well as they had expected. The managers who allocated a portion of their portfolio to Bitcoin in late 2020 had great returns, says the executive.
Along with other companies, CoinShares contributed to institutional investment in Bitcoin in 2020. Grayscale, MicroStrategy, Square, and Galaxy Digital also invested in Bitcoin.
The leading Bitcoin fund was part of a review of companies conducted in October 2020. At that time, they accumulated more than 600,000 BTC, which currently exceeds one million BTC.
By Alexander Salazar