The largest altcoin project by market value, Ethereum (ETH), was the most preferred crypto money by institutional investors after Bitcoin. However, a recent report by CoinShares, a UK-based wealth fund manager, shows that institutional investors are investing in 2 altcoin projects at the expense of Ethereum.
Institutional investors lose faith in Ethereum as they increase allocation to XRP and ADA
The CoinShares report says institutional investors are holding back on Ethereum as they increase allocations to DOT, ADA and XRP. While the cryptocurrency market has shown signs of recovery in recent days, well-established coins like Bitcoin, Ethereum and Cardano have lost more than 40% since the start of the year. Bitcoin has been falling steadily since last year, but the report reveals that institutional investors prefer Bitcoin the most.
According to the findings, 39% of respondents agree that Bitcoin has the most attractive growth outlook. This represents a 3% increase over the previous survey. The report also stated that Bitcoin has established a very strong relationship with traditional markets. A notable observation is that leading cryptocurrencies are inversely proportional to the US dollar. The report explains:
Bitcoin now has a well-established inverse correlation with the US dollar. This makes sense because of its emerging value-holding properties, but also makes it incredibly sensitive to interest rates.
Gold and Bitcoin correlation declining
Also, it has been observed that Bitcoin’s relationship with gold has seen a serious decline. Interestingly, its correlation with stocks has increased significantly. According to James Butterfill, Head of Research at CoinShares, the strength of the correlation has been found in interest rate sensitive stocks such as growth stocks. He added that the current state of the Bitcoin market is an excellent commentary. This means that interest rate hikes will pose a great danger to non-yielding assets.
Investors increased the weight on cryptocurrencies from 0.5% to 1% as they wanted to add positions during price weakness. However, the weight distribution remains well below the 1.8% seen in November 2021.
Institutions are currently abstaining for altcoin investors
It was also stated that although the perception of altcoins increased, they did not add to their positions due to access difficulties. Additionally, investors are adding to their positions through diversification, which is said to be an important risk reduction strategy. According to the report we quoted as Kriptokoin.com, speculation, which is the main reason for crypto money investment, has fallen since December 2021. This means that most investors now see them as good value, according to experts.
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