A recent study by Bybit research unveils a noteworthy trend among institutional investors in the cryptocurrency space, showing a pronounced preference for Ether (ETH) over Bitcoin (BTC). This shift in investment strategy contrasts with the approach of retail investors, who display a stronger inclination towards Bitcoin and a more diversified interest in various altcoins.
According to the report, which surveyed traders with assets on the exchange, institutional portfolios are now heavily concentrated in Bitcoin and Ethereum, making up 80% of their total cryptocurrency investments. The focus on Ethereum is attributed to the anticipated technological advancements with the Dencun upgrade, signaling a strategic bet on its future performance.
Ether’s market value has seen a significant uptick, trading above $3,100 and achieving a 33% rally year-to-date. This performance outstrips that of Bitcoin and is attributed to several key factors, including Ethereum’s transition to a proof-of-stake model, a decrease in ETH held on exchanges, and heightened staking activity. Bernstein researchers Gautam Chhugani and Mahika Sapra pointed to the expansion of Ethereum’s DeFi ecosystem and layer-2 networks as pivotal elements bolstering ETH’s market strength relative to Bitcoin.
Shifting investment patterns: A closer look
Institutional investors’ increased focus on Bitcoin and Ethereum represents a marked shift from their previous investment behaviors. Bybit’s December report indicated a bullish outlook on Bitcoin, with varying sentiments towards Ethereum as investors awaited the approval of a Bitcoin ETF. However, recent data suggests a strategic withdrawal from more volatile investment options such as meme coins, AI tokens, and BRC-20 tokens, despite their lucrative returns in 2023.
The current institutional strategy leans towards stability, with a preference for layer-1 tokens and DeFi protocols. The report also notes an interesting correlation between the performance of AI tokens and Nvidia, highlighting the tech giant’s influence on specific segments of the cryptocurrency market.
Conversely, Solana (SOL), despite its strong recovery in last year’s third quarter, has seen diminished interest from both institutional and retail investors. Bybit’s analysis indicates that SOL now accounts for only a minor percentage of institutional cryptocurrency portfolios as of January 31.
Ether’s remarkable year-to-date rally, coupled with strategic anticipation of the Dencun upgrade, places it at the forefront of institutional investment preferences, contrasting with the broader and more varied investment patterns observed among retail investors.
