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Institutional investors lose faith in Ethereum (ETH) as they increase allocation to XRP and ADA – Report

John KumiBy 0Edited by John Kiguru 31. May 20223 Mins Read
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  • According to the findings, 39 percent of the respondents agreed that Bitcoin has the most compelling growth outlook.
  • According to the report, speculation which has been a key reason for digital asset investment has fallen since December 2021.

Ethereum (ETH), the second-largest crypto by market cap, had been the most preferred behind Bitcoin by institutional investors. However, a recent report by CoinShares, an asset fund manager based in the UK has disclosed that institutional investors have taken a step back on the digital asset as they increase allocation to DOT, ADA, and XRP at the expense of the second-largest cryptocurrency by market cap. 

Related: Cardano’s ADA climbs above XRP after 30% surge, rise propelled by a spike in network activity

Though the digital assets have shown signs of a rebound, the likes of Bitcoin, Ethereum, and Cardano have all lost over 40 percent of their value since the beginning of the year. Bitcoin has been on a constant decline since last year, however, the survey reveals that it is the most preferred among institutional investors.

Per the findings, 39 percent of the respondents agreed that Bitcoin has the most compelling growth outlook. This is a 3 percent increase from the previous survey. 

The report further stated that Bitcoin has established a very strong relationship with the traditional markets. The price movement of the growth market has also had a lot of influence on the Bitcoin market. 

One notable observation is that the leading crypto assets have been inversely correlated to the US dollar. 

Bitcoin now has a well-established inverse correlation to the US dollar. This makes sense due to its emerging store of value characteristics, but it also makes it incredibly sensitive to interest rates.

Bitcoin correlation with gold declines

Also, it was observed that the correlation Bitcoin has with gold has seen a drastic decline. Interestingly, its correlation with equities has risen significantly. The strength of the correlation was found in interest rate-sensitive equities like growth stocks according to James Butterfill, the Head of Research at CoinShares. He added that the current situation of the Bitcoin market is the perfect interpretation. This means rate hikes would be a great danger to non-yielding assets. 

Investors have increased weighting on digital assets from 0.5 percent to 1 percent as they look to add to positions during the price weakness. However, the weighting remains well below the 1.8 percent seen in November 2021.

It was also stated that though investors’ perception of altcoins has increased, they have not added to their positions due to access challenges. In addition, investors add to positions because of diversification which is said to be an important risk reduction strategy. According to the report, speculation which has been a key reason for digital asset investment has fallen since December 2021. This means most investors now see them as good value. 

Related: Bitcoin (BTC) shows a divergence from the U.S. stock market performance, is this a good sign?

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This article is provided for informational purposes only and is not intended as investment advice. The content does not constitute a recommendation to buy, sell, or hold any securities or financial instruments. Readers should conduct their own research and consult with financial advisors before making investment decisions. The information presented may not be current and could become outdated.

John is a seasoned cryptocurrency and blockchain writer and researcher, boasting an extensive track record of years immersed in the ever-evolving digital frontier. With a profound interest in the dynamic landscape of emerging startups, tokens, and the intricate interplay of demand and supply within the crypto realm, John brings a wealth of knowledge to the table. His academic background is marked by a Bachelor's degree in Geography and Economics, a unique blend that has equipped him with a multifaceted perspective. This diverse educational foundation allows John to dissect the geographical and economic factors influencing the cryptocurrency market, offering insights that go beyond the surface. John's dedication to the crypto and blockchain space is not merely professional but also personal, as he possesses a genuine passion for the technologies that underpin this revolutionary industry. With his astute research skills and commitment to staying at the forefront of industry trends, John is a trusted voice in the world of cryptocurrencies, helping readers navigate the complex and rapidly changing terrain of digital assets and blockchain innovation. John Kiguru is an accomplished editor with a strong affinity for all things blockchain and crypto. Leveraging his editorial expertise, he brings clarity and coherence to complex topics within the decentralized technology sphere. With a meticulous approach, John refines and enhances content, ensuring that each piece resonates with the audience. John earned his Bachelor's degree in Business, Management, Marketing, and Related Support Services from the University of Nairobi. His academic background enriches his ability to grasp and communicate intricate concepts within the blockchain and cryptocurrency space. Business Email: info@crypto-news-flash.com Phone: +49 160 92211628

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