It’s no secret that institutional investors are behind most of the inflows into Grayscale Investments’ flagship bitcoin fund. Now an executive at the firm has highlighted another trend in which more than three-quarters of demand for its products is stemming from newcomers into the crypto space. Grayscale Investments Managing Director Michael Sonnenshein told CNBC:

“Even just in Q3, 84% of inflows were from hedge funds, non-crypto hedge funds that want digital asset exposure.”

Big investors have been spooked by bitcoin as a result of the lack of regulatory framework not to mention the resources it would require to safely custody crypto assets. Grayscale says they streamline this process for clients, delivering a product that “looks and feels like many of the other instruments these institutions use.”

Grayscale’s ability to attract sidelined institutional capital to the crypto space could be a harbinger for what’s ahead in the broader cryptocurrency market, including the possibility of a bitcoin ETF. The firm certainly seems to think so and has filed a Form-10 with the U.S. SEC for the Grayscale Bitcoin Trust (GBTC), effectively registering the firm with the securities regulator.

GBTC has been trading since May 2015, and the firm is seeking registered status in response to unprecedented investor demand despite the fact that the BTC price is stuck below $8,000 currently. In fact, Grayscale says trailing-three month trading volume for its bitcoin investment trust has ballooned threefold year-over-year. The greater the regulatory apparatus around bitcoin investing, the higher the likelihood that big investors will dip their toe into the crypto waters.

Bitcoin Price

It’s hard to ignore that Grayscale is filing with the SEC during a crypto market downturn. Institutional demand for its product, however, could be telling the market something, most notably that bitcoin technical signals are pointing toward rally the near term.

The Bloomberg Galaxy Crypto Index has been under pressure alongside the market, shedding 10% in November alone.  The index, which was launched by Bloomberg and Galaxy Digital Capital Management, tracks the performance of leading USD-traded cryptocurrencies, including BTC, ETH, and XRP. Based on what Bloomberg describes as a “trading envelope indicator,” there could be relief from the recent selling pressure sooner than later. They point to the bitcoin price stabilizing near its 200-day moving average support, which in addition to lifting the bitcoin price could buoy the index.

Nonetheless, crypto trading volumes have been quite pathetic, having revisited Oct. 24 levels — the day before China President Xi Jinping’s bullish blockchain remarks, as pointed out by Mati Greenspan, Founder of Quantum Economics. Greenspan in his newsletter explains how the market has been hit by a one-two punch of falling trading volumes and lower than average bitcoin transaction values of less than $1 billion per day. A bitcoin whale has the power to move the market needle in either direction in one fell swoop.

Drop Gold

Grayscale Investments is famous for its ‘Drop Gold’ marketing campaign in which it promotes its fund and pits bitcoin against the precious metal.

The ad has ignited harsh criticism from the gold community, seemingly accomplishing what it was designed to do.