Key Points
A recent report by Bybit Research reveals a surprising shift in institutional sentiment towards cryptocurrencies.
Previously, institutions have been more bullish on BTC, but they are now favoring Ethereum (ETH) over Bitcoin (BTC).
ETH Gains Momentum in Institutional Holdings
The report indicates a growing focus towards ETH among institutions, a trend that started in September 2023 and accelerated in January 2024.
In January 2024, institutions allocated 39.82% of their holdings to ETH, slightly more than the 39.49% allocated to BTC.
These allocations have increased from 50% to 80% since the last report in 2023.
Only 5% of their portfolio is allocated to alternate cryptocurrencies and 15% to stablecoins, indicating a clear preference for BTC and ETH.
Ethereum has marginally surpassed Bitcoin, reflecting growing investor interest in these leading cryptocurrencies.
Bybit attributes the rise in Ether holdings to several factors.
One of these is the anticipated Dencun upgrade, scheduled for launch in March 2024, which aims to reduce transaction costs on Layer 2 protocols.
While this upgrade may not have the same impact as the Merge, its successful implementation is expected to boost ETH and other Layer 2 tokens.
Market optimism regarding the potential approval of an Ether spot ETF by the US Securities and Exchange Commission (SEC) by the end of 2024 could also be contributing to the surge.
This approval could further elevate Ether’s status and increase institutional interest in the digital asset.
Other factors include its deflationary supply since the shift to Proof-of-Stake (PoS), low levels of ETH held on exchanges, and increased staking activity.
Institutions have significantly reduced their altcoin positions, particularly in volatile categories like meme coins, AI tokens, and BRC-20 tokens, focusing more on stable assets like Layer 1 tokens and decentralized finance (DeFi) protocols.
Interestingly, this change in market sentiment towards Ether contrasts with previous months when institutions were more bullish on Bitcoin.
At present, Ether is trading around $3200 while BTC reached $56,000.
However, retail investors differ in their opinions, being more bullish on BTC than Ether.
Despite the positive outlook for Ether, Bitcoin has also seen a 20% increase since the start of the year, outperforming the broader crypto market.
