In this episode, Sunny Ray sits down with Michael Sonnenshein, CEO of Grayscale Investments, shortly after news broke that Grayscale added 18 times the daily mined Bitcoin supply into its products in a single day. Sonnenshein explains what that metric means and shares how Grayscale raised 5.7 billion dollars in 2020 alone, more than four times its cumulative total from the prior six years. He traces his path from working at bulge bracket investment banks to joining Barry Silbert in January 2014, when the Grayscale Bitcoin Trust held just 60 million dollars in assets, and how it grew into a firm managing over 27 billion dollars across nine products. The conversation covers where institutional demand is coming from, the rise of Ethereum only and diversified crypto investors, and Sonnenshein's frustration with the idea that Bitcoin has failed because people are not buying coffee with it. He closes with advice for newcomers weighing traditional finance against jumping straight into crypto and fintech careers.
Grayscale CEO Michael Sonnenshein on 18x Bitcoin buying days, Barry Silbert, and why institutions are pouring in.
Grayscale added 18 times the Bitcoin mined supply in one day, is that real and what does it actually mean?
It's a metric comparing new Bitcoin created through mining in a given timeframe to the growth in Bitcoin held inside the Grayscale Bitcoin Trust. People get encouraged because the trust, the world's largest Bitcoin investment vehicle, is growing at many multiples of the rate new Bitcoin enters circulation, which serves as a barometer for investor demand and interest in the space.
Can you share your personal story of how you got into Bitcoin?
I was at a bulge bracket investment bank in 2012-2013, going to business school part time. Meeting entrepreneurs there reshaped what success meant to me, so I left JP Morgan and started interviewing at hedge funds and family offices. I met Barry Silbert, who had started Second Market and later Grayscale. He offered me a role helping lead sales for a Bitcoin product with 60 million dollars in AUM, and I've never looked back since January 2014.
What did Barry Silbert say that convinced you Bitcoin would become a real asset class?
He analogized digital currency as a springboard to financial inclusion, talking about change-the-world messaging that wasn't typical at a bulge bracket bank. He had an ability to see around corners, believing Bitcoin would be an asset class investors would want exposure to, though its attributes made direct access difficult. He also tested my sales ability by literally asking me to sell him a pen.
Where is this institutional demand for Bitcoin really coming from?
The dominant inflows Grayscale is experiencing come from the institutional segment, meaning hedge funds, endowments, and pensions, alongside plenty of high net worth individuals and family offices. Since traditional avenues like bonds, stocks, and ETFs aren't yet the same channels for accessing Bitcoin or Ethereum, Grayscale offers a familiar investment fund structure so investors don't have to handle buying, transferring, or storing the assets themselves.
Is this institutional interest a Bitcoin-only phenomenon, or are other crypto assets seeing similar growth?
Twelve to eighteen months ago everyone's first taste of crypto was Bitcoin, but throughout 2020 we saw massive growth in the Grayscale Ethereum Trust and a new breed of Ethereum-only or Ethereum-first investors. Now we're also seeing allocators who want broad ecosystem exposure but can't pick winners and losers, driving strong uptake of our diversified Digital Large Cap fund.
Is there something you believe to be true about Bitcoin that others in the space might disagree with?
Outside the crypto ecosystem, it's irksome when people say Bitcoin has failed because we're not buying lattes with it. The near-term use cases are as a digital store of value, a gold 2.0, a speculative investment, or an early-stage tech bet. The idea that Bitcoin failed its promise because it hasn't replaced the dollar or euro couldn't be further from the truth.
What advice would you give someone considering a move into the crypto space?
I can't say enough about the foundation traditional financial services gave me, understanding how assets move, legalities, and regulations, which positioned me for success at Grayscale. There's no single right path. Figure out your north star, whether that's engineering and blockchain innovation or building a foundation in traditional finance first. The amount of human capital shifting into this space is really encouraging.
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