In a recent report by Bybit, a leading cryptocurrency exchange, insights into the changing dynamics of institutional and retail investors’ asset portfolios shed light on the evolving landscape of the crypto market. The report, covering the period from September to the present, highlights a notable shift in asset allocation behaviors amid unprecedented market volatility since 2022.
The Bybit report reveals that institutional users allocated half of their asset portfolio to Bitcoin (BTC) as of September. Remarkably, the proportion of BTC held by retail investors was the lowest, with stablecoins dominating their portfolio allocations. However, from September onwards, institutional users have rapidly increased their allocation to Ethereum (ETH) in their portfolios.
The crypto markets have been characterized by extraordinary volatility since 2022, influenced by both global macroeconomic factors and crypto-native incidents. Bybit’s research focuses on understanding how traders adapt their asset allocations amidst these market fluctuations, especially in the highly volatile period since December 2022.
During the research period, a significant player in the market, INS Traders, displayed a diversified crypto portfolio strategy. Notably, 45% of their assets were secured in stablecoins, while 50% were strategically invested in a combination of Bitcoin and Ether. A mere 5% of their portfolio was dedicated to altcoins, reflecting a risk-averse approach in a bear market.
INS Traders’ September Bitcoin Surge
One intriguing observation was the sharp spike in INS’s Bitcoin holdings during September, almost doubling their percentage over the initial three quarters of 2023. Half of INS’s asset portfolio was allocated to BTC in September alone. This alignment with the prevailing positive market sentiment toward Bitcoin is attributed to favorable lawsuit outcomes, creating anticipation for the potential approval of a spot BTC exchange-traded fund (ETF) by the SEC.
Conversely, retail traders exhibited the lowest holding percentage in BTC composition compared to INS and VIP users. The earlier Bybit report suggested that this divergence could be linked to the comparatively higher leverage levels maintained by retail traders.
Bybit’s ETH, Stablecoins & Altcoins Insight
While INS traders increased their Bitcoin holdings, the report highlighted a continued decline in ETH holdings across most traders since Shapella earlier this year. Despite a stable Ether price after Shapella in April and May, there has been a notable surge in INS’s Ether holding percentage starting in September, suggesting a general upbeat sentiment toward crypto among INS traders.
The Bybit report also delved into the stablecoin allocations of retail and institutional traders. Retail traders consistently exhibited the highest stablecoin percentage, influenced by their leverage practices. However, INS holders displayed a drop in stablecoin percentage during bearish markets and an increase in bull markets, indicating a successful market-timing strategy.
September witnessed a sharp decline in stablecoin holdings for INS, aligning with a significant surge in BTC and ETH holding percentages. If this trend persists, it signals a growing optimism among institutions regarding the market’s trajectory.
As per the report, institutions remain downbeat on altcoins, with a consistent decline in the holding percentage of other tokens. While normal users and VIPs experienced an initial increase in holding other tokens during the first half of the year, this trend began to reverse in August and September, reaching lower levels recorded in December.
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