Bitcoin has double benefits: record inflows last week, and U.S. university endowment funds continue to buy

After last week's price decline, Bitcoin's inflows hit a record high last week, indicating that the market's confidence in cryptocurrency assets has not declined significantly. At the same time, sources said that Harvard, Yale and other university endowment funds have been buying Bitcoin and other cryptocurrencies, which may bring new benefits to Bitcoin.

Cryptocurrencies saw record inflows last week after weeks of outflows

According to data released by cryptocurrency fund manager CoinShares on Monday, funds flowing into cryptocurrency funds and products hit a record high of $1.31 billion last week as investors bought on the dip in prices of Bitcoin and other cryptocurrencies last week.

The move comes after cryptocurrency funds and products experienced weeks of small outflows. As of January 22, total assets under management (AUM) in the cryptocurrency fund and product industry had fallen to $29.7 billion from a record high of $34.4 billion on January 8. At the end of 2019, the industry had assets of just $2 billion.

Grayscale, the world's largest digital currency manager, reported $24 billion in assets under management last week, down from $28.2 billion on January 8. CoinShares, the second-largest cryptocurrency fund, reported $2.9 billion in assets last week, also down from $3.4 billion on January 8.

US university endowments have been buying Bitcoin

According to CoinDesk, citing two people familiar with the matter, endowment funds of American universities such as Harvard, Yale, Brown and Michigan have been buying cryptocurrencies through their accounts opened on Coinbase and other exchanges over the past year or so.

As early as 2018, several Ivy League endowment funds had already shown interest in blockchain technology and invested in cryptocurrency-focused venture capital funds.

In the 2020 annual report of the trading platform Coinbase, university endowment funds were mentioned, but no specific names were mentioned.

According to one source, some university endowments may have opened accounts with Coinbase more than 18 months ago.

“(The accounts have been opened) probably since mid-2019 ... most are over a year old,” the source said. “I think they’ll probably discuss it publicly sometime this year. I’m guessing they’ve made pretty good returns.”

A university endowment is a pool of money at an academic institution, usually in the form of charitable donations, that can be allocated and invested in a variety of assets to support teaching and research.

Harvard University has the largest university endowment fund in the United States, with assets of more than $40 billion. Yale University has more than $30 billion, the University of Michigan has $12.5 billion, and Brown University has $4.7 billion. It is not clear how much cryptocurrency each fund has allocated, and it may only account for a small portion of its total assets.

Investors are more price sensitive

“Based on the speed at which bitcoin prices have reached new highs (too quickly), we think investors have been highly price sensitive this year,” said James Butterfill, investment strategist at CoinShares.

According to the Bitstamp platform, after climbing to a historical high of $42,000 on January 8, Bitcoin continued to fluctuate and fall, falling to a low of $28,800 last Friday. As of Tuesday this week, Bitcoin has slightly rebounded to above $32,000.

The decline of Bitcoin is partly due to the tightening of US regulatory rhetoric. Last Tuesday (January 19), the US Senate Banking Committee held a hearing on the nomination of former Federal Reserve Chairman Janet Yellen as US Treasury Secretary. In her speech, Yellen mentioned that cryptocurrencies are "worrying" and said that "cryptocurrencies are a special focus for terrorists in terms of financing and money laundering." After that, Bitcoin fell for three consecutive days, from above $37,000 to a low of $28,800.

"With recent price weakness due to comments from U.S. Treasury Secretary Janet Yellen, and with the Bitcoin market seeing record inflows last week, now seems like a good buying opportunity," Butterfield said.

Data shows that about 97% of funds flowed into Bitcoin, while the second largest cryptocurrency Ethereum saw inflows of $34 million last week.

So far this year, Bitcoin trading has been much more active than in previous years, with an average daily trading volume of $12.3 billion this year, compared to just $2.2 billion in 2020.