The crypto space has shown tremendous growth. Genesis’ Q3 report shows that the behavior of institutional investors is changing, with most of them now turning to decentralized finance (DeFi) and altcoins.
The report further revealed that institutional investor demand for Bitcoin is no longer as high as it was in the past.
Genesis, a digital asset firm, revealed the details in its third quarter market watch report, which showed that demand for Bitcoin is weakening as institutions now turn to DeFi and altcoins.
In addition, traders are looking for other opportunities to profit from the spread between Bitcoin spot prices and futures markets. The report states that this is due to “structural changes” in the crypto market, with exchanges limiting the leverage they offer.
The report reads: “In the first quarter of 2021, Genesis first noticed a significant decline in the weight of Bitcoin in our overall portfolio due to the relative lack of trading opportunities denominated in Bitcoin. While this paused in the second quarter, it resumed in the third quarter due to the continued GBTC premium reversal and the flattening of the basis curve.”
The report also noted that Bitcoin has become less attractive to short-term traders as the primary cryptocurrency has become more institutional.
Institutions turn to DeFi
The report further states that many institutions are turning to the DeFi space. Institutional demand for Ethereum is also high, as institutions are using the asset for lending and borrowing between DApps.
Institutions are also paying more and more attention to emerging layer 1 protocols. This has led to an increase in demand for altcoins in the third quarter of 2021. One emerging platform that has seen increased interest is Solana, which hit a new all-time high last week.
Although demand for Bitcoin is weakening, the report pointed out that the much-anticipated US Bitcoin futures exchange-traded fund (ETF) has revived the market, and institutions such as investment banks and asset management companies have shown great interest in this Bitcoin product. Genesis' third-quarter report showed that the company's over-the-counter (OTC) trading activity increased by 47% to 61% compared with the second quarter.
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