The Bitcoin craze may be showing signs of cooling down despite the fact that the overall crypto market continued to grow in Q3. The motive behind this downtrend is the shift of institutional attention away from Bitcoin, toward DeFi and altcoins like Ethereum.
Full-service crypto-asset company Genesis recently released its Q3 2021 Market Observation Report, highlighting some of the market’s key trends. Statistics show that demand for Bitcoin is declining this time around, while institutions are looking into DeFi platforms and other altcoins.
Institutional Shift to Cryptos
Over the past 10 years, Bitcoin has been a controversial topic and has had a significant impact on the global financial system.
Although cryptocurrencies are undeniably an inevitable trend in the development of money, when the world is in the age of information revolution, the largest digital currency has also caused unpredictable fluctuations since its inception.
Genesis’ report points out the lack of opportunities for traders to generate money through spreads is among the main reasons that contribute to the downturn.
The crypto market structure has significantly changed during the second quarter, which was shown through the reduction of leverage offers. Take Binance, the major exchange has a limited leverage offer to 20x for accounts opened within 30 days.
“In Q1 2021, Genesis first noted a significant decline in the weighting of BTC in our overall portfolio due to the relative lack of BTC-denominated trading opportunities. While this paused in Q2, it resumed over the third quarter due to the continued GBTC premium inversion and flattening of the basis curves,” notes the report.
Another factor that may be driving institutional rotation out of Bitcoin is the Chinese regulatory repression of cryptos. On the bright side, institutions and banks have positive points on the US first future linked Bitcoin ETF.
ETFs allow investors to diversify their investments easily without actually owning the assets tracked by the ETF. These ETFs provide a simpler alternative to buying and selling individual assets that maximize profits as well as minimize losses.
A Bitcoin ETF is a simulation of the price of the most popular virtual currency in the world, allowing investors to buy into an ETF without going through a complicated transaction process.
Additionally, ETF holders will not be directly invested in bitcoin itself. So they won’t need to worry about the complicated security and storage procedures of cryptocurrency investors.
Ethereum Looks Ripe for More Strength
The bloom of DeFi, and obviously not to mention the NFT craze, has driven more institutional adoption into ETH.
According to the report, the market has witnessed an increasing number of institutions that are entering the DeFi industry. Institutions show strong interest in borrowing and lending in ETH across a variety of decentralized apps, including the blockchain (DApps).
The report states,
“Alongside greater interest in ETH loan originations during the quarter, altcoins (alts) – and particularly L1 alternatives – saw a boost in demand, serving as natural liquidity pairs for DeFi yield opportunities.”
Ethereum may break out in the future. First, the Ethereum blockchain processes more transactions than Bitcoin, so payments are faster and more efficient.
Second, the Ethereum network supports building multiple applications. Ethereum is famous for its smart contracts that power the building of decentralized applications like DeFi (decentralized finance) or NFTs (unique tokens).
Ethereum is exploding with a lot of new applications that may drive popularity.
As the Ethereum 2.0 upgrade is approaching, many investors seem to believe that Ethereum 2.0 will have a renaissance. The upgrade, for example, will make the Ethereum network faster and more secure, and able to process thousands of transactions per second on the blockchain.
However, if we look at Ethereum as an investment, the only challenge is that Ethereum is not fully developed, so it is difficult to predict what improvements will come in the next few years.
ETH has long been ranked second to Bitcoin – but there are plenty of reasons to be excited about the future of Ethereum. With experts in fintech expecting big things from crypto in the near term, can ETH finally turn the tables against BTC?
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