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(Bloomberg) – As Bitcoin’s record grabs attention, its crypto compatriot Ethereum continues to expand its appeal beyond the crowd of software programmers.
Prior to this year, most investors’ first stop was Bitcoin, according to Michael Sonnenshein, chief executive of Grayscale Investments LLC, which has investment products that track both and only allows investments from institutional and accredited investors. But the Ethereum blockchain, the most widely used in the world, and its Ether token are getting more attention, he said.
“Over the course of 2020 we are seeing a new group of investors who are first Ethereum and in some cases just Ethereum,” Sonnenshein said in a telephone interview. “There is a growing belief around Ethereum as an asset class.”
DeFi, of course, was the hottest thing in cryptocurrency last year, Ethereum also tricked users into committing enough digital currency to allow for a system upgrade. And Ethereum “appears to hold the leadership status of the platform,” according to Bloomberg Intelligence strategist Mike McGlone.
While Bitcoin’s gain of around 170% year-to-date would look good to virtually any extent, Ether has risen by around 360% amid a boom in decentralized finance, or DeFi, which often uses its blockchain to power this. that many cases have been described as blatant money hoards similar to those seen during the 2017 crypto bubble.
Read the QuickTake: Why the “DeFi” utopia would be finance without financiers
The Grayscale Ethereum Trust, which tracks the price of Ether, has 29.6 million shares outstanding compared to 5.2 million at the end of 2019, according to data compiled by Bloomberg. Inflows went from $ 20.1 million in the fourth quarter of 2019 to $ 204.1 million in the third quarter of 2020. And in the third quarter, more than 17% of the inflows into the Grayscale Ethereum Trust came from new institutional investors, according to a company report.
That doesn’t mean it’s smooth sailing. Cryptocurrencies remain volatile: Ethereum is currently trading around $ 600, well off its February 2018 closing high of $ 937. While it has three more moves of 10% in the past two weeks, the token continues to accumulate interest. . And the Grayscale Ethereum Trust ran into problems when the price was disconnected from the net asset value.
“The development of the asset class has continued to consolidate,” Sonnenshein said. “Ethereum shares the staying power of Bitcoin.”
© 2020 Bloomberg LP
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