Leading crypto exchange Bybit has analyzed trader behavior during the wild market swings since 2022. Their asset allocation research explores how different groups shifted holdings across coins, stablecoins, and alt tokens as prices whipsawed.
With crypto buffeted by crises like Terra’s collapse and FTX’s implosion, traders employed strategies aligning risk profiles and sentiment. However, significant differences emerged between institutions, wealthy individuals, and retail investors.
Key Takeaways from Bybit’s Asset Allocation Analysis report:
- Institutions kept half in Bitcoin and Ethereum combined.
- Retail piled into stablecoins, while institutions redeployed them.
- Bitcoin holdings diverged greatly between groups in September.
- Ethereum interest waned after an initial spike around the Merge.
- Altcoin exposure steadily declined as institutions avoided risks.
Institutional Players Take Advantage of Chaos
Bybit’s data underscores retail traders’ vulnerability in markets increasingly driven by big money. Institutions stuck firmly to blue-chip crypto assets, namely Bitcoin and Ethereum, even as extreme volatility ravaged many altcoins and tokens.
According to the report, 45% of institutional traders’ crypto holdings sat in stablecoins as a tempering influence on volatility. Nevertheless, they readily redeployed some of that buffer into what they viewed as relatively safe havens like Bitcoin and Ethereum during periods of optimism.
This ability to rapidly shift allocation allowed institutions to capitalize on temporary upswings and market green shoots while protecting capital from flash crashes.
In contrast, retail investors consistently held higher stablecoin levels, with most of their non-stablecoin allocation locked in more speculative plays.
Institutional investors spiked Bitcoin exposure in September
For example, when looking at the percentage of their portfolios held in actual Bitcoin, institutions and wealthy traders spiked exposure in September as sentiment improved temporarily.
But at the same time, retail barely nudged above year-to-date lows in BTC allocation hit during the summer doldrums. Institutions rapidly capitalized on periodic market optimism, while retail traders suffered forced liquidations.
Institutional investors kept 50% combined in Bitcoin and Ethereum
According to Bybit, outside the 45% stablecoin allocation, institutions kept 50% combined in Bitcoin and Ethereum.
Bybit also noted plunging interest in altcoins around Ethereum’s major Merge upgrade. Institutions barely nibbled other tokens despite occasional retail trader surges.
Ethereum holdings have dropped since Shapella
Earlier this year, the percentage of ETH holdings increased in anticipation of Shapella. However, despite Ether maintaining a stable price after Shapella in April and May, the rate has declined across most traders. An unusual surge in the holding percentage of institutional investment in Ethereum has been observed since September.
Nature of stablecoin holdings
Historical patterns indicate that during bullish markets, retail traders tend to reduce their stablecoin holding percentage. Conversely, in directionless or bear markets, they tend to increase it.
In contrast, INS holders display a decrease in stablecoin percentage during bearish markets and an increase in bullish markets, suggesting adept market timing by institutional investors.
September witnessed a notable drop in stablecoin holding percentages, coinciding with a significant rise in BTC and ETH holding percentages.
The report comes at a time when Bitcoin and Ethereum are surging in value in comparison to the past 18–19 months. According to data from CoinGecko, Bitcoin is up by 144% year-to-date and 19.7% in the last 30 days. BTC briefly surpassed the $42,000 level before falling to its current price of $41,508.
Ethereum is not far behind, as it has surged by 76.2% year-to-date. ETH is up by 21.3% in the last 30 days and has breached the $2,200 level after quite some ups and downs. However, it remains uncertain as to whether this is the beginning of another bull market or just any other sell-the-news event in anticipation of a Bitcoin ETF.