A significant shift in the cryptocurrency landscape has emerged, with Ether (ETH) surpassing Bitcoin (BTC) as the largest single asset held by institutions, according to a recent report from Bybit Research. This news comes amidst a 33% year-to-date rally for ETH, compared to Bitcoin’s current performance.

Bybit’s report suggests that this institutional preference for Ether may be fueled by several factors, including:

• The Dencun Upgrade: This upcoming Ethereum upgrade, expected later this year, aims to significantly improve scalability and transaction efficiency on the network. Bybit speculates that institutions are anticipating a potential upward price swing for ETH post-upgrade.
• Deflationary Supply: Unlike Bitcoin’s capped supply of 21 million coins, the switch to a proof-of-stake consensus mechanism on Ethereum has introduced a deflationary supply. This means the total amount of ETH in circulation is actively decreasing, potentially making it more attractive to long-term investors.
• Low Exchange Holdings: Compared to Bitcoin, a smaller portion of ETH is currently held on centralized exchanges. This suggests lower selling pressure and potentially higher future demand for the asset.
• Increased Staking Activity: The proof-of-stake mechanism encourages users to lock up their ETH to participate in network validation and earn rewards. This reduced selling pressure further contributes to ETH’s appeal.

While institutions are heavily allocating their portfolios to both Bitcoin and Ether, with a combined 80% concentration, the report highlights a divergence in sentiment compared to retail investors. Bybit’s research suggests that retail users remain more bullish on Bitcoin, potentially due to its established reputation as the “original cryptocurrency.”

This news follows a recent report by Bernstein analysts, highlighting the growth of Ethereum’s Decentralized Finance (DeFi) ecosystem and layer-2 networks as additional factors driving ETH’s outperformance. While the future trajectory of both cryptocurrencies remains uncertain, Bybit’s research reveals a growing institutional interest in Ethereum, potentially marking a significant shift in the dynamics of the crypto market.