Ether is Now the Largest Institutional Crypto Asset: Bybit Research

• Institutions are heavily allocating their portfolios to ether and bitcoin, while retail users are more bullish on bitcoin, according to a Bybit report.

• Bybit’s report highlights a shift in market sentiment since December, with institutions now favoring ether due to the anticipated Dencun upgrade and reducing their altcoin positions.

• Despite Solana’s strong performance in Q3 2023, Bybit data suggests that neither institutions nor retail users are interested in hodling the token, with SOL now constituting only a single-digit percentage of institutional portfolios as of January 31.

Institutions are over-allocating their portfolio to ether (ETH), followed closely by bitcoin (BTC), which is a contrast to retail users who are much more bullish on the latter, a new report from Bybit research said.

Institutions have increased their portfolio concentration in bitcoin and ether to 80%, with a significant bet on ether due to the anticipated Dencun upgrade, according to Bybit’s report, which surveyed traders with assets in the exchange. Meanwhile, retail users have a lower concentration in these assets and a higher tilt towards altcoins, the report added.

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

In a recent report, Bernstein analysts 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 the world’s largest digital asset.

This market sentiment had changed from December when Bybit published its last report, which showed that institutions were bullish on bitcoin, mixed on ether, and were moving more of their ether and altcoin holdings into bitcoin in anticipation of the bitcoin exchange-traded fund (ETF) ETF being approved.

Bitcoin is up 20% since the beginning of the year, according to CoinDesk Indicies data, outpacing the performance of the CoinDesk 20, a measure of the largest digital assets, which is up 12%.

Bybit also observed that 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, focusing more on stable assets like layer-1 tokens and decentralized finance (DeFi) protocols.

AI tokens seem to be correlated with chip designer Nvidia’s performance, as the GPU giant is practically synonymous with AI developments. The company’s recent blowout earnings report sent AI tokens rallying, and many large-cap tokens in the category, like (AGIX) are up double digits in the last week.

Despite Solana’s (SOL) strong performance in the third quarter of last year, where it rallied and erased many of the losses of the crypto winter, Bybit’s data suggests that both institutions and retail users have not been interested in HODLing the token that was once at the center of Sam Bankman-Fried’s portfolio.

SOL, says Bybit, now constitutes only a single-digit percentage of institutional portfolios as of January 31.