Institutional Investors Increasing Exposure to Altcoins, Solana Leading the Way
Institutional investors are diversifying their portfolios to include altcoins, with Solana (SOL) emerging as a popular choice. According to a recent report by CoinShares, there has been a “dramatic increase in allocations” from wealth managers and hedge funds toward Solana. This shift signifies a broader interest in altcoins among institutional investors.
Investor Sentiment Shifting Toward Solana
James Butterfill, the head of research at CoinShares, noted in an April 24 report that “investors are more optimistic for Solana.” The report is based on a survey of 64 investors, representing a total of $600 billion in assets under management. Nearly 15% of these investors had invested in SOL, a significant increase from a January survey, where none of the respondents had invested in Solana.
Decline in XRP Investments, But Product Inflows Continue
While Solana is gaining traction, XRP (XRP) has seen a “significant decline,” with none of the surveyed investors holding it now, compared to the January survey. However, despite the lack of direct XRP holdings among surveyed institutions, CoinShares’ report revealed minor inflows of $1.3 million to XRP investment products for the week ending April 19.
Ranking of Cryptocurrencies by Growth Potential
Among the cryptocurrencies with the most compelling growth outlook, Solana ranked third with just under 15% of respondents agreeing. This is an increase from over 10% in the January survey. Bitcoin (BTC) remained at the top, with 41% of respondents agreeing it had the best growth potential, followed by Ether (ETH), which had just over 30% of respondents bullish on its growth. Butterfill noted that investor appetite for Ether had waned since January, dropping from around 35%.
Cryptocurrency Weighting in Portfolios on the Rise
The survey found that the percentage of cryptocurrency in investors’ portfolios rose to 3%, compared to 1.3% in January, representing “the highest weighting since the survey began in 2021.” Butterfill pointed out that some of the largest contributors to this increase were allocations from institutional investors who gained exposure to Bitcoin via U.S. ETFs. Despite this trend, equities remain the most heavily weighted asset class at over 55%.
Reasons for Buying and Barriers to Entry
The primary reason for investing in digital assets is exposure to distributed ledger technology. Interestingly, despite the rise in cryptocurrency prices since January, the percentage of investors who believe cryptocurrencies are “good value” jumped from under 15% to over 20%. Butterfill added that client demand has increased, often accompanying positive price momentum.
However, despite the overall positive trends, wealth managers and institutional investors noted significant barriers to entry. The most common barrier for those without crypto in their portfolios was regulation, which Butterfill suggested might be due to corporate restrictions and varying interpretations of regulatory guidelines.
Among investors who already hold crypto, the top perceived risks were regulations and politics, showing a rise from January’s results. On a positive note, Butterfill mentioned that concerns over volatility and custody “continue to diminish.”
