By
Godfrey Benjamin
May 15th, 2024
The change in market sentiment towards Ether is in stark contrast to previous months when institutions were more bullish on Bitcoin.
In a surprising turn of events, institutions are now favoring Ethereum (ETH) over Bitcoin (BTC), according to a recent report from Bybit Research, the research arm of the cryptocurrency exchange. The company said this marks a significant shift in sentiment, as institutions have traditionally been more bullish on BTC than other cryptocurrencies.
Institutional Investors Allocate 40% of Portfolio to ETH
The report indicates that institutions are increasingly turning their focus towards ETH, with a trend that began in September 2023 and gained momentum in January 2024, reaching approximately 40%.
In January 2024, institutional investors allocated 39.82% of their holdings to ETH while allocating only 39.49% to BTC. Bybit noted that these allocations increased from 50% to 80% since its last report in 2023.
Institutions have earmarked only 5% of their portfolio for alternate cryptocurrencies and 15% for stablecoins, signaling a clear preference for BTC and ETH. Interestingly, Ethereum has edged past Bitcoin by a slight margin, indicating growing interest among investors in these top cryptocurrencies.
Factors Contributing to Ethereum’s Performance
Bybit attributed the increase in Ether holdings to the anticipated Dencun upgrade, scheduled for launch in March 2024. The upgrade aims to reduce transaction costs on Layer 2 protocols through a method called “proto-dank sharding”.
While the upgrade may not have the same magnitude of impact as the Merge, its successful implementation is expected to provide a boost to ETH and other Layer 2 tokens.
Additionally, the surge could be credited to market optimism regarding the approval of an Ether spot ETF by the US Securities and Exchange Commission (SEC) by the end of 2024. This approval, if granted, could further elevate Ether’s status and increase institutional interest in the digital asset.
Other factors such as its deflationary supply since the shift to Proof-of-Stake (PoS), low levels of ETH held on exchanges, and increased staking activity, have all played a significant role in Ether’s recent outperformance of BTC.
Institutions have also been observed to significantly reduce their altcoin positions, particularly in volatile categories like meme coins, AI tokens, and BRC-20 tokens. Instead, they are focusing more on stable assets like Layer 1 tokens and decentralized finance (DeFi) protocols.
Retail Investors Are Bullish on Bitcoin
The change in market sentiment towards Ether is in stark contrast to previous months when institutions were more bullish on Bitcoin. Currently, Ether is trading around $3200 while BTC reached $56,000 at press time.
While institutional investors are choosing Ether over BTC, retail investors have different opinions. These traders are relatively more bullish on BTC than Ether.
“We have seen Bitcoin and Ether allocation percentages climbing to the highest level in the past six months. Yet it is a stark contrast that retail users have not allocated capital into Ether as significantly as institutions since our last report. Also, retail users have yet to trim their position in Bitcoin since our last report,” the report reads.
Despite the positive outlook for Ether, Bitcoin has also seen a 20% increase since the beginning of the year, outpacing the performance of the broader crypto market.