Ether Attracts Institutional Interest, While Bitcoin Continues to Appeal to Retail Investors: Bybit

Research conducted by Bybit indicates an increasing institutional optimism towards Ether, fueled by the anticipated beneficial effects of the Dencun upgrade on the Ethereum blockchain.

Scheduled for March 13, Dencun will implement several Ethereum Improvement Proposals (EIPs), including proto-danksharding, which aims to lower Layer-2 transaction fees, according to developers.

“Although the forthcoming upgrade is unlikely to have the same effect as the Merge, its successful execution is expected to provide a boost to ETH and other Layer 2 tokens,” the report stated.

The previous major upgrade to Ethereum, referred to as Shapella, occurred in April 2023. This upgrade was significant as it enabled users and validators to withdraw their staked ether from the network.

Institutional Transition from Bitcoin to Ether

Bybit reports that enthusiasm for Ether began in September 2023 and gained traction in January 2024, with approximately 40% of institutional portfolios now allocated to it. The team also observed that expectations regarding the SEC’s approval of a Spot Ether ETF by the end of 2024 are contributing to the favorable outlook for Ether.

According to Bybit, institutions began to decrease their Bitcoin holdings in early December 2023, coinciding with the asset testing a key resistance level of $40k. Following this, their Bitcoin holdings continued to diminish. It remains uncertain whether this transition from Bitcoin to Ether signifies a short-term tactical shift or a medium-term strategic reallocation.

With the Bitcoin halving approaching in April 2024, Bybit noted that it is risky to adopt a negative stance on the crypto asset, as the halving is typically perceived as a positive event.

Retail vs. Institutional Investment Approaches

The report also detailed asset allocation distributions. It revealed that institutions allocated approximately 40% to Bitcoin, 40% to Ether, 15% to stablecoins, and 5% to altcoins from July 2023 to January 2024.

Bybit indicated that institutions have increased their portfolio emphasis on Bitcoin and Ether from 50% to 80%. In contrast, retail investors exhibit a lower concentration in Bitcoin and Ether, with these two assets comprising around 35% of their overall portfolios.

“Retail investors display a distinctly different investment approach compared to institutions, with a greater inclination towards altcoins and a higher cash allocation (e.g., increased stablecoin percentage),” the report noted.

Source: Bybit

Retail Investors Exhibit More Confidence in Bitcoin than Ether

In another significant distinction, retail investors were found to possess comparatively stronger confidence in Bitcoin over Ether. Bybit noted that they did not invest in Ether to the same degree as institutions during the research timeframe.

Moreover, retail investors have not diminished their Bitcoin positions since the interval between December 2022 and September 2023.

“The unique investment style of retail investors may be attributed to their higher leverage, which necessitates a greater level of portfolio assets as collateral (INS leverage at ~12; Retail users’ leverage level at ~20),” Bybit stated.

Retail Investors Maintain Greater Altcoin Exposure

The report indicated that retail investors continue to hold larger stakes in altcoins compared to Bitcoin and Ether. However, there is a prevailing cautious sentiment towards altcoins among the majority of users.

Institutions have significantly halved their overall positions in altcoins in percentage terms. They were noted to have nearly exited all positions in highly volatile token categories, such as meme, AI, and BRC-20 tokens, with the exception of L1, DeFi, and metaverse tokens.

“Despite remarkable returns in 2023, institutions have not favored those high-risk, high-reward investments in 2023. We only observe a clear increase in the holding of meme tokens from early September to October,” Bybit remarked.

Additionally, Bybit found that although Solana has outperformed, both institutions and retail investors were not holding SOL for prolonged periods.

In the third quarter of 2023, Solana held a notable position in the portfolios of both institutions and retail investors. However, as Solana surged to $40, both institutions and retail investors chose to take profits.

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