Bitcoin Institutional Investment with Michael Sonnenshein from Grayscale
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“The taboo nature of the asset class has been shrugged off…Goldman Sachs invested with Digital Currency Group in Circle and as soon as they did that it provided enough cover for pretty much every other bank or financial institution to get involved in the space.”
Interview location: London, UK
Interview date: Mon 18th Jun 2018
The institutional relationship with Crypto Assets has been one of light touch. Where banks had been dismissive of Bitcoin, but open to the opportunities with blockchain, the demand from institutional investors has contributed towards the changing banking narrative towards Crypto.
There is growing demand from institutional investors to hold Crypto Assets within their portfolio, yet these assets present new challenges from custody to regulation. Still, the need is driving forward a growing industry of solutions for those who want exposure to the market.
Institutions hold the capital but want to avoid the risk of handling the asset, but with companies such as XAPO and BitGo offering institutional custody solutions and the likes of Coinbase and Grayscale offering products which expose investors to the class without the headache of buying, selling and managing, institutions now have viable options to invest in the market.
The banking sector is adapting; Goldman Sachs and JP Morgan have opened trading desks, and the crypto market has gone from enemy to friend. As Crypto Asset and blockchain innovation continues to move at pace, investors do not want to miss out on the opportunity within these market.
With over $1.5bn in crypto assets under management ($3bn before the crash in January), Grayscale is one of the leading companies providing products for institutional investors. Their range of Single Product Investment Trusts and Diversified Large Cap Fund allow institutional investors to place bets on the Crypto market without the risk of custody or challenges associated with buying and selling.
Michael Sonnenshein knows both sides of the market. His career started in the traditional banking sector as an analyst at Barclays before he moved to JP Morgan and then onto Grayscale in 2013, where he is now the Managing Director.
In this interview, we discuss the interest from institutional investors, the impact of the bear market on sentiment and how Grayscale handles custody for $1.5bn in assets under management.
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BREAKDOWN OF THE SHOW
00:03:20: Introductions
00:04:32: Michael's background
00:08:59: About Grayscale
00:09:46: Impacts of volatility
00:11:52: Current price levels
00:12:45: Use cases
00:14:56: ZenCash
00:17:43: Reference rate explained
00:20:52: Grayscale's protocols
00:21:39: Grayscale's impact on the market
00:22:36: Investment trusts explained
00:25:58: Source of the fear of investing
00:27:32: Grayscale's products are not ETFs
00:30:14: The price dip
00:31:33: Dapps
00:33:19: Tokenisation of assets
00:35:49: Custody
00:38:17: How Michael views the market
00:42:00: Recent recruitment in the space
00:42:52: Final comments
THANKS
Jason Camiolo for audio production, his website is at http://www.jasoncamiolo.com/
James Parkin for helping me with admin and trading
Paul Edmonds for graphic design
