Institutional investors are becoming increasingly optimistic about cryptocurrency, with 83% indicating plans to increase their allocations in the upcoming year, as revealed by a recent survey.
Conducted in January, the research surveyed 352 institutional decision-makers and found a growing assurance in digital assets as regulatory frameworks clarify and new applications arise.
A significant majority (59%) of respondents aim to allocate over 5% of their assets under management (AUM) to crypto by 2025, reflecting its transition from a specialized investment to an essential part of investment portfolios.
This trend follows a robust performance in 2024 for the crypto market, characterized by the rising adoption of stablecoins, decentralized finance (DeFi), and tokenized assets.
Stablecoins and DeFi
Stablecoins are attracting significant interest from institutions, with 84% of respondents either using or considering them for various uses beyond mere transactions.
Key reasons driving this adoption include yield generation (73%), foreign exchange (69%), and internal cash management (68%).
DeFi, while still in the early phases of institutional involvement, is poised for substantial growth. Currently, just 24% of investors are engaged in DeFi, but this number is projected to increase threefold to 75% by 2027.
Institutional investors are especially keen on DeFi derivatives, staking, and lending options, showcasing the potential for disruption in traditional financial services.
While Bitcoin (BTC) and Ethereum (ETH) remain staples in institutional portfolios, 73% of participants reported holding at least one alternative cryptocurrency.
XRP and Solana (SOL) were the most widely held altcoins. Furthermore, 68% of investors showed interest in exchange-traded products (ETPs) that provide single-asset exposure to these digital currencies.
Regulatory clarity as a driver for growth
Despite the prevailing optimism, regulatory uncertainty poses a substantial challenge.
Over half (52%) of investors polled cited regulation as their primary concern, followed by volatility (47%) and custody security (33%).
Nevertheless, 68% believe that enhanced regulatory clarity will catalyze the next wave of institutional adoption in the crypto space.
The findings indicate a continued movement towards digital assets among institutional participants, with increasing allocations, a variety of use cases, and a growing engagement with products.
While regulatory changes and market volatility may present obstacles, the overall direction implies a sustained momentum for cryptocurrency in institutional investment portfolios.
Mentioned in this article
