Institutional investors are showing heightened interest in cryptocurrencies, planning to increase their allocations by 2025, as shown in a study by Coinbase and EY-Parthenon.
Increase in Crypto Investments
According to a March 18 report by Coinbase and EY-Parthenon, around 83% of institutional investors plan to increase their investments in cryptocurrencies by 2025. A survey of over 350 investors revealed that almost three-quarters of firms currently hold cryptocurrencies other than Bitcoin and Ethereum. A significant majority of respondents plan to boost their crypto allocations to 5% or more of their portfolios, noting that cryptocurrencies represent the best opportunity for attractive risk-adjusted returns over the next three years.
Growing Popularity of Altcoins and ETFs
Among institutional investors, XRP and Solana are the most popular altcoin holdings. Altcoin popularity could rise significantly if US regulators approve plans for exchange-traded funds (ETFs) focusing on altcoins. Bloomberg Intelligence notes that Litecoin, Solana, and XRP are the most likely to receive approval soon. Recently, the Chicago Mercantile Exchange (CME Group) launched futures contracts tied to Solana, marking a significant step toward institutional adoption of the altcoin.
Institutional Interest in Stablecoins and DeFi
The report indicates that 84% of surveyed investors are either using or considering using stablecoins. Institutional investors leverage stablecoins not only for crypto transactions but also for generating yield, foreign exchange, and internal cash management. Meanwhile, use of decentralized finance (DeFi) platforms among institutional investors is currently at 24%, but this figure is expected to rise to 75% over the next two years. Investors find potential in using derivatives, staking, lending, and access to altcoins through DeFi.
The study indicates that institutional investors continue to show strong interest in cryptocurrencies, planning to increase investments in both traditional digital assets and in stablecoins and DeFi.
