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Bybit Research Shows Ether Overtook Bitcoin as Favorite Investment for Institutions

According to a recent report released by Bybit, institutional investors are favoring Ethereum (ETH) over Bitcoin (BTC) in their investment portfolios, in contrast to retail investors, who show more enthusiasm toward the latter digital currency. Bybit’s analysis, which polled traders who are active on the platform, revealed that institutions have boosted their allocation to Ether and Bitcoin, making up 80% of their portfolio. This shift is notably influenced by the awaited Dencun upgrade, particularly driving the significant bet on ETH.

Meanwhile, retail investors display a different pattern, demonstrating a lower concentration on Ether and Bitcoin while showing a stronger inclination toward alternative cryptocurrencies, or altcoins. Ether has surpassed Bitcoin with a 33% year-to-date rise, currently trading above $3,100. The surge is due to various factors, including its deflationary supply since transitioning to proof-of-stake, a decline in Ether held on exchanges and a rise in staking activity.

Mahika Sapra and Gautam Chhugani, analysts at Bernstein, also cited in a recent analysis the development of Ethereum’s layer-2 networks and DeFi ecosystem, along with the planned Dencun update, as major drivers of the cryptocurrency’s performance.

The current market sentiment marks a shift from December 2023, as indicated by Bybit’s previous report, where institutions displayed bullishness toward Bitcoin and were relatively neutral on Ether. Most of them were reallocating their altcoin and Ether holdings into Bitcoin, awaiting the approval of a Bitcoin spot exchange-traded fund (ETF) by the U.S. Securities and Exchange Commission (SEC).

According to data from CoinDesk Indices, Bitcoin has increased by 20% since the start of the year, outperforming the 12% gain made by CoinDesk 20, a gauge of the top digital assets.

However, despite the potential for large profits in 2023, institutions have significantly decreased their exposure to cryptocurrencies, especially those in volatile categories such as BRC-20 tokens, artificial intelligence and meme coins. Rather, an increasing emphasis is being placed on stable assets such as DeFi protocols and layer-1 tokens.

Tokens related to artificial intelligence seem to be influenced by the performance of chip designer Nvidia, as evident from recent market movements. Nvidia’s robust earnings report led to a rally in AI tokens, with most large-cap tokens in this category experiencing double-digit growth.

Despite Solana’s impressive performance in the second-last quarter of 2023, where it rebounded from the crypto winter losses, Bybit’s analysis indicates waning interest from both retail and institutional investors. As of Jan. 31, 2024, SOL accounts for a relatively small percentage of institutional investments.

Over the coming months, crypto industry actors such as Marathon Digital Holdings Inc. (NASDAQ: MARA) will actively follow another anticipated market mover, the halving of Bitcoin. It isn’t clear whether the price will move up significantly or miners will have to diversify their revenue sources when mining rewards are sliced in half.

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