Institutional investors favor Ether over Bitcoin: Bybit research

Institutional investors are increasingly favoring Ether (ETH) over Bitcoin (BTC), as detailed in a recent report by Bybit research. This change in preference contrasts with the investment patterns of retail users, who continue to exhibit a stronger inclination towards Bitcoin, alongside a broader interest in various altcoins. The report, which draws on data from traders with assets on the Bybit exchange, reveals that institutional portfolios are now heavily weighted towards Bitcoin and Ether, making up 80% of their total cryptocurrency holdings. A significant part of this shift is attributed to the heightened anticipation surrounding Ethereum’s upcoming Dencun upgrade, which is expected to bring substantial improvements to the network.

Ether’s recent market performance has solidified its appeal to institutional investors, with its value surpassing $3,100 and achieving a 33% increase year-to-date. This growth outstrips that of Bitcoin and is driven by a combination of Ethereum’s transition to a proof-of-stake model, a deflationary supply mechanism, diminished quantities of ETH on exchanges, and an uptick in staking activities. Additionally, insights from Bernstein analysts Gautam Chhugani and Mahika Sapra highlight the expansion of Ethereum’s DeFi ecosystem and layer-2 networks as pivotal to ETH’s robust performance relative to Bitcoin.

Shifting investment strategies: A closer look at institutional and retail behaviors

The investment strategy among institutions has undergone a significant transformation from the patterns observed in December, according to previous reports by Bybit. At that time, institutional sentiment was largely bullish on Bitcoin, with a mixed outlook on Ether, partly in anticipation of the Bitcoin ETF approval. The current focus, however, has seen a marked reduction in institutional exposure to volatile assets such as meme coins, AI tokens, and BRC-20 tokens, despite their impressive returns in 2023. Instead, there’s a clear tilt towards perceived stable assets, including layer-1 tokens and DeFi protocols. The performance of AI tokens, in particular, appears to be closely aligned with the fortunes of tech giant Nvidia, reflecting a unique correlation between the crypto market and traditional tech industries.

Moreover, despite Solana’s (SOL) significant rally in the third quarter of the previous year, which saw it recover from the losses of the crypto winter, Bybit’s analysis indicates a cooling interest from both institutional and retail investors in holding SOL. As of January 31, SOL now accounts for only a minor fraction of institutional cryptocurrency portfolios, signaling a shift in investor sentiment and strategic focus within the market.

Conclusion

Bybit’s report sheds light on the evolving preferences and strategies of institutional versus retail cryptocurrency investors, underscoring a significant pivot towards Ether, particularly in anticipation of the Dencun upgrade. This strategic realignment towards Ether and Bitcoin signifies a broader trend of institutional investors seeking stability and potential growth within the volatile cryptocurrency market, with a cautious approach towards more speculative assets.

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