What Happened?
Institutional investors have significantly increased their confidence in cryptocurrencies and plan to substantially increase their asset allocations in 2025. Over 80% of the surveyed institutions expect to raise their cryptocurrency investments, with nearly 60% planning to allocate more than 5% of their assets to this area. It is evident that cryptocurrencies are transitioning from niche assets to mainstream investments.
Institutional interest in stablecoins and decentralized finance (DeFi) has also grown significantly, with optimism surrounding their diverse use cases. Meanwhile, participation in DeFi is expected to rise substantially over the next two years.
Although there is optimism about the future of cryptocurrencies, regulatory uncertainty remains the primary concern for institutional investors, and it is also seen as a key driver for the further development of the industry.
Institutional Investors Optimistic About Cryptocurrency Outlook for 2025, Expecting Significant Increases in Allocations
According to a global survey conducted in January 2025 by the largest U.S. exchange Coinbase and EY-Parthenon, 352 institutional decision-makers were interviewed. The results showed that institutional investors are generally optimistic about the outlook for cryptocurrencies in 2025. After a strong performance in 2024, cryptocurrencies continued their upward momentum into the new year, and surveyed investors are confident about the future.
The survey revealed that the vast majority (83%) of institutional investors plan to increase their cryptocurrency allocations in 2025. The main reason is that they believe cryptocurrencies will provide the most attractive risk-adjusted returns in the next three years.
Notably, 59% of the respondents plan to allocate more than 5% of their assets under management (AUM) to cryptocurrencies. This indicates that cryptocurrencies are increasingly becoming an essential component of institutional portfolios, moving beyond their role as a niche asset class.
Part of the reason driving institutional investors’ interest is their belief that there will be clearer regulatory frameworks in the future, which will serve as a catalyst for new opportunities in digital assets.
Stablecoins and DeFi Set to Soar
Stablecoins have also garnered widespread interest from institutional investors. The survey shows that 84% of respondents are either currently using stablecoins or are interested in using them. These stablecoins are not only used for cryptocurrency trading but are also applied in other scenarios, including yield generation (73%), foreign exchange trading (69%), internal cash management (68%), and external payments (63%).
In addition to mainstream cryptocurrencies, nearly three-quarters (73%) of the surveyed investors reported holding cryptocurrencies other than Bitcoin and Ethereum. Among these, Ripple (XRP) and Solana (SOL) tokens are the most common holdings.
Moreover, 68% of investors said they may also purchase exchange-traded products (ETPs) for single assets such as SOL and XRP.
If U.S. regulators approve the pending applications for cryptocurrency spot ETFs this year, holdings of these altcoins (referring to cryptocurrencies other than Bitcoin) may further increase.
Decentralized finance (DeFi) is also expected to see significant growth. While only 24% of the surveyed investors are currently involved in DeFi, this figure is expected to grow to 75% over the next two years. Institutional interest in DeFi includes derivatives, staking, and lending, followed by alternative coins, cross-border settlements, and yield farming.
Regulatory Uncertainty Remains the Primary Challenge
Despite the general optimism among institutional investors about the future of cryptocurrencies, there are still some challenges. The most significant concern is the uncertainty surrounding the regulatory environment (52%), followed by market volatility (47%) and secure custody (33%).
However, 68% of investors believe that clearer regulations will serve as a catalyst for the next wave of growth in the digital asset industry.
Regardless, the survey results indicate that institutional investors will continue to deepen their involvement in the cryptocurrency space in 2025. From increasing asset allocations and expanding application scenarios to adopting new financial products, all signs point to a positive development outlook. Although market volatility and macroeconomic and geopolitical factors may pose challenges in the short term, institutional investors’ optimistic attitude toward cryptocurrencies is expected to persist and lay a solid foundation for the industry’s future development.
Reference: cointelegraph, coinbase