Institutions Favor Ether Over Bitcoin in Crypto Portfolios: Bybit Report

Institutions are increasingly allocating their portfolios to ether and bitcoin, while retail users are showing more bullish sentiment towards bitcoin, according to a recent report by Bybit. The report highlights a notable shift in market sentiment since December, with institutions now favoring ether over other cryptocurrencies due to the anticipated Dencun upgrade, while reducing their altcoin positions.

Despite Solana’s impressive performance in the third quarter of 2023, Bybit’s data suggests that neither institutions nor retail users are currently interested in holding the token. As of January 31, SOL now only constitutes a single-digit percentage of institutional portfolios.

The report from Bybit research indicates that institutions are heavily over-allocating their portfolios to ether (ETH), closely followed by bitcoin (BTC). This is in contrast to retail users, who are more bullish on bitcoin and have a lower concentration in these assets, with a higher tilt towards altcoins.

Ether, currently trading above $3100, has outperformed bitcoin with a 33% rally year-to-date. This performance is attributed to factors such as its deflationary supply since the shift to proof-of-stake, low levels of ETH held on exchanges, and increased staking activity.

Analysts from Bernstein, Gautam Chhugani, and Mahika Sapra, also highlighted the growth of Ethereum’s DeFi ecosystem and layer-2 networks, as well as the anticipated Dencun upgrade, as key catalysts for ETH’s performance compared to other digital assets.

The market sentiment has shifted from December when institutions were bullish on bitcoin and mixed on ether. Institutions have significantly reduced their altcoin positions, particularly in volatile categories like meme coins, artificial intelligence (AI), and BRC-20 tokens, despite their high returns in 2023. Instead, they are focusing more on stable assets like layer-1 tokens and decentralized finance (DeFi) protocols.

Despite the strong performance of Solana in the past, both institutions and retail users are currently not interested in holding the token. Bybit’s data shows that SOL now only constitutes a single-digit percentage of institutional portfolios as of January 31.

Overall, the report from Bybit research highlights the changing market dynamics and the preferences of institutions and retail users when it comes to allocating their portfolios in the cryptocurrency space.