Institutional investors are becoming increasingly optimistic about cryptocurrency, with 83% indicating plans to increase their crypto allocations by 2025, as noted in a report released on March 18.
Currently, nearly 75% of the organizations surveyed reported holding cryptocurrencies beyond just Bitcoin (BTC) and Ether (ETH), and a “substantial majority” expressed intentions to elevate crypto allocations to 5% or greater of their overall portfolios, as highlighted in the report.
The driving force behind this trend is the belief that “cryptocurrencies offer the best potential for generating attractive risk-adjusted returns over the upcoming three years,” according to the findings.
The research was based on interviews conducted in January with over 350 institutional investors.
Among the altcoins held by institutions, XRP and Solana emerged as the most favored, according to the survey.
The survey gathered insights from over 350 financial institutions regarding their crypto investments.
Related: Stablecoin adoption and ETFs are set to enhance crypto performance in 2025: Citi
Anticipating Altcoin ETFs
Altcoin investments may increase further if US regulators grant approval for upcoming exchange-traded fund (ETF) listings this year.
Asset managers are waiting for the US Securities and Exchange Commission’s approval to list several proposed altcoin ETFs.
Bloomberg Intelligence suggests that Litecoin (LTC), SOL, and XRP are the most likely candidates for near-term approval.
On March 17, the Chicago Mercantile Exchange Group, the largest derivatives exchange in the US by volume, introduced futures contracts linked to SOL, marking a crucial advancement toward the institutional adoption of this altcoin.
Surge in Stablecoins and DeFi
At the same time, the institutional adoption of stablecoins is rising, with 84% of survey participants either already holding stablecoins or considering acquiring them.
The report notes that institutions are using “stablecoins for a variety of applications beyond just facilitating crypto transactions, including yield generation (73%), foreign exchange (69%), internal cash management (68%), and external payments (63%).”
In December, a major investment bank forecasted that an increase in stablecoin adoption will enhance onchain activity, particularly in decentralized finance (DeFi).
The survey revealed that only 24% of institutional investors currently engage with DeFi platforms, but this number is projected to rise to nearly 75% within the next two years.
“Institutions are drawn to DeFi for various reasons, citing derivatives, staking, and lending as their primary interests, followed by access to altcoins, cross-border settlements, and yield farming,” the report stated.
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