By Suzanne McGee, Niket Nishant and Manya Saini
NEW YORK (Reuters) -Bitcoin's surge to a record this week has reignited questions about the role institutional investors are playing in pushing it higher, with analysts suggesting their role is still in its infancy.
The world's largest cryptocurrency earlier this week surged to a record above $123,000, receiving a boost on the expectation of pro-crypto policies from Washington. While buzz around digital assets has increased, there is room for demand from institutional investors to grow as pension funds and other long-term buyers add bitcoin to their portfolios, analysts say.
On Thursday, the U.S. House of Representatives voted in favor of creating a regulatory framework for the U.S. dollar-pegged cryptocurrency tokens referred to as stablecoins. President Donald Trump is expected to sign that legislation into law on Friday. The House also passed two other key bills related to cryptocurrencies, both of which will now go to the U.S. Senate.
“We're still in the early innings when it comes to institutional ownership,” said Adrian Fritz, head of research at 21Shares, a digital assets investment firm, adding that retail investors still dominate crypto markets.
Less than 5% of all spot bitcoin Exchange Traded Fund assets are held by long-term investors such as pension funds and endowments, with another 10% to 15% owned by hedge funds or wealth management firms, Fritz calculates.
The latter group of wealth managers, however, often buy these funds on behalf of high-net worth retail clients, and the bulk of ETF ownership remains retail, he said.
There is a correlation between soaring retail purchases of crypto ETFs and crypto-related stocks and a run-up in prices, according to estimates from Vanda, a financial research firm. The data shows retail buyers bought heavily in late 2024 when prices surged after Donald Trump – who has vowed to be a “crypto president” won the U.S. election – as well as during the recent rally.
Crypto buyers have been aided by a series of bills U.S. lawmakers are expected to pass this week, the most consequential of which – known as the Genius Act – will define the rules around stablecoins, a fast-growing area of the crypto market.
The passage of the crypto legislation on Thursday by the Republican-controlled U.S. House of Representatives paves the way for the first U.S. federal law for digital assets.
Some large U.S. lenders, including Bank of America and Citigroup, are also working on launching stablecoins.
Another bill will provide regulatory clarity by formally establishing definitions of digital commodities and spelling out the roles of agencies in overseeing digital assets. This could make it easier for institutions that have long avoided the sector to invest.
