Institutional Traders Split Between Bitcoin and Ether, Skeptical of Altcoins: Bybit Research

A recent report from Bybit Research reveals insights into the sentiment and asset allocation of institutional traders in the cryptocurrency market during the first three quarters of 2023.

The Bybit Research report delves into the asset allocation strategies of different cohorts, namely institutions, VIPs, and retail traders, amidst the volatile market environment since December 2022.

The findings reveal that institutions are displaying a strong preference for Bitcoin (BTC) over Ethereum (ETH) or altcoins, with approximately half of their portfolio allocated to Bitcoin. Notably, institutions increased their Bitcoin holdings during the volatile market conditions of 2023, a trend distinct from other user groups.

Institutional traders nearly doubled their Bitcoin holdings during the initial three quarters of 2023, and as of September, around 50% of their assets were denominated in Bitcoin. The report attributes this bullish stance to positive market sentiment and the anticipation of the U.S. Securities and Exchange Commission (SEC) approving a spot Bitcoin exchange-traded fund (ETF).

On the other hand, retail traders exhibited lower Bitcoin holdings, potentially influenced by higher leverage levels in their trading activities. The report provides insights into the differentiated approaches and preferences of various market participants amid the dynamic cryptocurrency landscape.

Institutional Traders Show Skepticism Towards Altcoins, Favoring Bitcoin and Ether

The report from Bybit Research sheds light on the asset allocation strategies of institutional traders and large Bitcoin holders (whales) in the cryptocurrency market. The findings reveal a general decline in altcoin holdings among traders, with a noticeable decrease starting in August.

Institutional traders adopted a cautious stance, with their asset allocation strategy consisting of 45% in stablecoins, 50% strategically invested in Bitcoin (BTC) and Ethereum (ETH), and 5% dedicated to altcoins. This skepticism toward altcoins, particularly among institutional investors, is attributed to concerns about the volatility of these alternative assets.

Despite a general decline in Ether holdings since the Ethereum blockchain’s Shapella upgrade, there was a surge in institutional traders’ Ether holdings in September. This coincided with positive market sentiment driven by excitement over ETF news.

The report suggests that institutional traders remain bullish on Bitcoin, express skepticism toward altcoins, and have mixed sentiments regarding Ether. The research highlights a shifting stance on asset allocation, emphasizing a pivot back to Bitcoin over Ether, influenced by Ether’s prolonged slump against BTC and a muted response to newly launched futures-based ETH ETFs.

The data for the research report was generated based on Bybit’s active user base from December 2022 to September 2023, with VIP traders defined as investors holding portfolios worth more than $50,000.

Bybit Research Unveils Institutional and Retail Trader Strategies in Bull and Bear Markets

The research conducted by Bybit reveals distinctive asset allocation strategies among active users, defined as those conducting more than 20 monthly trades. These findings shed light on nuanced patterns during both bullish and bearish market conditions.

One notable trend is the substantial increase in Bitcoin holdings by institutional traders during positive market sentiments. This stands in contrast to retail traders, who exhibited lower Bitcoin holdings, potentially linked to their higher levels of leverage.

Retail traders consistently maintained a higher percentage of stablecoins, likely influenced by their leverage practices. During bull markets, they tended to decrease their stablecoin holdings, while in bearish or uncertain markets, an inclination to increase stablecoin holdings was observed.

Institutional holders, on the other hand, displayed a decrease in stablecoin percentage during bearish markets and an increase during bullish markets, suggesting potentially successful market timing.