• Crypto investment firm Grayscale enjoyed a 900% surge in assets under management last year as bitcoin's rally drove multibillion-dollar inflows.
• The firm's assets ballooned to $20.2 billion from $2 billion in 2020, according to a Thursday report. Grayscale's Bitcoin Trust drove most of the inflows, growing to $17.5 billion AUM from $1.8 billion.
• Institutional investors' warming to bitcoin also aided the firm. Such funds counted for 86% of flows into Grayscale products in 2020, as well as 93% of all fourth-quarter inflows.
• The firm's rapid expansion came as bitcoin spiked higher through the end of last year. Wider adoption and new interest from institutional investors led the token to surpass its 2017 peak in December and double over the next 22 days.
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Crypto investment firm Grayscale saw assets under management surge tenfold in 2020 as wider adoption of bitcoin drove billions into its trusts.

The firm's assets leaped to $20.2 billion from $2 billion last year, according to a quarterly report published Thursday. Grayscale's Bitcoin Trust garnered the bulk of the inflows, surging to $17.5 billion from $1.8 billion in assets under management as the popular cryptocurrency's price rocketed higher. On average, the bitcoin trust took in $90 million a week.

Institutional investors' newfound interest in cryptocurrencies was also a boon for the firm. Such funds made up 86% of all investment in Grayscale products through the year and 93% of all fourth-quarter inflows. Such funds largely turn to Grayscale's crypto trusts for regulatory reasons instead of directly investing in digital tokens.

The average commitment from institutional investors also ballooned in the fourth quarter, climbing to $6.8 million from $2.9 million in the quarter prior.

Read more:The CIO of a $500 million crypto asset manager breaks down 5 ways of valuing bitcoin and deciding whether to own it after the digital asset breached $40,000 for the first time

The inflows mirror cryptocurrencies' frenzied climb through the last months of the year. Bitcoin ended 2020 up 303% and reached an all-time high of $41,940 just last week. The cryptocurrency slipped through the start of the week but retook its $40,000 support in early Thursday trading.

The rally kicked off in the fall after MicroStrategy and Square revealed they bought bitcoin and opened the door for other public firms to do the same. PayPal's announcement that it would allow users to buy and sell cryptocurrencies further lifted prices in late-October.

Institutional investors then moved in on bitcoin, fearing they were missing out on the party. Others saw the token as an appealing alternative to gold and an effective hedge against inflation.

In the end, institutional investors found enough reasons to pile in and supercharge the cryptocurrency boom. Bitcoin surpassed its 2017 record in mid-December and doubled just 22 days later. Grayscale said Thursday it has also seen growing interest from wealth managers, a cohort that is "critical for continued adoption."

Read more:Cathie Wood's ARK Invest runs 5 active ETFs that more than doubled in 2020. She and her analysts share their 2021 outlooks on the economy, bitcoin, and Tesla.

Still, new risks threaten to keep the crypto market's rally from continuing through 2021. The SEC is expected to approve the first bitcoin exchange-traded fund this year. The move stands to end Grayscale's "effective monopoly" on institutional investors' flows and pull cash out of its trusts, JPMorgan analysts said Friday.

"A cascade of Grayscale Bitcoin Trust outflows and a collapse of its premium would likely have negative near-term implications for bitcoin," they added in a note to clients.

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