NYDIG Sees Institutional Order Books Pushing BTC Holdings to $25B by Year-End

  • NYDIG believes it could grow its AUM to $25 billion as institutions are still hungry for Bitcoin.
  • Increasing institutional demand is growing at impressive levels, giving more hope for Bitcoin’s long-term trajectory.
  • Institutional demand remains a significant point of focus for the crypto market, with more firms expected to enter into the industry soon enough.
  • In line with the phenomenon, the New York Digital Investment Group (NYDIG) expects to quadruple its assets under management this year.

This week, Ross Stevens, the founder and chairman of NYDIG, made an appearance at the MicroStrategy World Conference 2021. In his session, the executive explained that the crypto investment company could be sitting on $25 billion in assets under management (AUM) by year’s end.

Stevens explained that NYDIG’s AUM figures currently stand at about $6 billion. However, the firm has seen enough institutional investors’ commitment to push the figure past the $25 billion mark. Considering that none of the investors have walked back their intention to commit to Bitcoin, the firm expects a windfall going into the year.

NYDIG is a fund management firm that operates as the crypto-facing subsidiary of Stone Ridge Holdings Group LLC. The company provides an avenue for large investors to improve their crypto exposure. Last year, it helped facilitate the purchase of $100 million by MassMutual, the Massachusetts-based insurance giant.

As the Wall Street Journal reported at the time, MassMutual, a company with about $235 billion in AUM, had made the purchase through a backchannel with NYDIG. The insurance giant also purchased a minority stake in NYDIG for $50 million. The deal will also see NYDIG custody MassMutual’s Bitcoin stash. Now that more institutions appear to be lining up to make purchases, NYDIG could be in for its most fruitful year.

Institutional Demand: A MicroStrategy Case Study

Stevens had made the revelation to Michael Saylor, a businessman who has become overly familiar with cryptocurrencies over the past year. Since August 2020, under Saylor, MicroStrategy has purchased over $1.3 billion worth of Bitcoin, becoming one of the industry’s largest institutional players.

The company has benefited immensely from the decision. MicroStrategy built a $425 million Bitcoin holding when the asset was only trading at about $11,000. When the asset eventually grew to $21,000 apiece, the firm announced that it had issued $650 million in convertible senior notes and would use most of the raised capital to purchase more of it.

Now that Bitcoin is in the high $30,000s, it is anyone’s guess just how much MicroStrategy’s decision to move to the Bitcoin standard has grown its reserves.

Along with its bottom line, MicroStrategy’s Bitcoin obsession seems to be helping its stock price. In December, Tyler Radke, an analyst at investment banking giant Citigroup, downgraded MicroStrategy’s stock based on fears that the company was overpricing its Bitcoin play. As the analyst explained, while the company had made a sizable return on its Bitcoin investment, the market appeared to have been overpricing its core business.

However, Bitcoin’s rally in December helped the company’s reserve to balloon even more. While Radke’s criticism of MicsoStartey’s core business has some merit, the market appeared to have overlooked that as its stock surged over 100 percent. The stock, which traded at $286.21 when Radke downgraded it, has now jumped past the $740 mark and is surging on.

The Virginia-based firm is precisely the type of client that NYDIG appears to be looking for. Deep-pocketed and not afraid to take risks, MicroStrategy has become a whale among whales in the Bitcoin market.

Although some could criticize the effects of increasing institutional action on Bitcoin’s liquidity, everyone seems to agree that it would benefit the market in the long run.

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Author: Jimmy Aki

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