Increased Institutional Embrace of Cryptocurrencies
In line with a recent CNF update highlighting DeFi’s growing adoption in capital markets, institutional investors are increasingly embracing cryptocurrencies, with a significant majority planning to expand their portfolios and explore decentralized finance (DeFi).
A recent survey by Coinbase and EY-Parthenon reveals that 83% of institutional investors intend to increase their crypto allocations in 2025, driven by the pursuit of attractive risk-adjusted returns:
Survey Findings: Crypto Allocations on the Rise
An overwhelming majority (83%) of surveyed investors plan to increase their allocations to crypto in 2025, driven by their view that cryptocurrencies represent the best opportunity to generate attractive risk-adjusted returns over the next three years. A clear majority (59%) of surveyed investors plan to allocate more than 5% of their AUM to crypto in 2025 as the asset class further cements its role in institutional portfolios.
The survey highlights a growing trend among institutions to diversify their crypto holdings beyond the traditional giants, Bitcoin (BTC) and Ether (ETH). Nearly three-quarters of the firms surveyed currently hold alternative cryptocurrencies, with XRP and Solana (SOL) emerging as the most popular choices.
According to Reuters, the potential approval of altcoin exchange-traded funds (ETFs) by U.S. regulators is poised to further boost institutional investment in cryptocurrencies. Asset managers are awaiting the green light from the U.S. Securities and Exchange Commission (SEC) for over a dozen proposed altcoin ETFs.
Stablecoins and DeFi Adoption on the Rise
Stablecoins are gaining traction among institutional investors, with 84% of respondents either holding them or considering doing so.
Institutions are utilizing stablecoins for various purposes beyond facilitating crypto transactions, including generating yield (73%), foreign exchange (69%), internal cash management (68%), and external payments (63%).
While only 24% of institutional investors currently engage with DeFi platforms, this figure is expected to surge to nearly 75% in the next two years. Institutions are particularly interested in DeFi use cases such as derivatives, staking, lending, access to altcoins, cross-border settlements, and yield farming.
Regulatory Developments and Market Outlook
The evolving regulatory landscape is playing a crucial role in shaping institutional participation in the crypto space. The SEC has approved several Bitcoin-based commodity trust shares and trust units, signaling a more accommodating stance toward cryptocurrency investments.
Importantly, this growing institutional interest in cryptocurrencies naturally extends to Bitcoin, the market’s leading digital asset.
At the time of writing, Bitcoin (BTC) is trading at $83,445, reflecting a 0.06% increase in the past 24 hours and a 1.01% increase in the past week — signaling a weak but steady uptrend amid recent market fluctuations.