The recent craze around Bitcoin ETFs has somewhat eclipsed a budding movement: the growing interest of institutional investors in altcoins. However, in the media shadow of the queen of crypto, assets like Ethereum and Cardano attract substantial capital. Driven by solid fundamentals and high earnings potential, they are establishing themselves as the new darlings of fund managers.
Institutional investors looking for yield other than Bitcoin
Despite record flows into Bitcoin ETFs last month, not all eyes are on Bitcoin. Behind the scenes, institutional investors are discreetly diversifying their crypto exposures. Objective: take advantage of the greater potential offered by certain well-chosen altcoins.
According to a recent study by CoinShares, Ethereum and Cardano are among the most popular. In 2024 alone, ETH saw inflows of $16 million while ADA attracted $6 million. Amounts that are certainly modest compared to the billion injected into Bitcoin, but indicative of an emerging trend.
Several factors explain this interest in altcoins. On the one hand, these crypto assets offer a lower valuation than Bitcoin, and therefore greater room for growth in the long term. On the other hand, their use cases in DeFi or smart contracts suggest strong adoption potential. By betting on ETH and ADA, institutional investors are betting on the cryptos of tomorrow.
The underlying risks of altcoins
However, this discreet rush towards altcoins is not without danger. Their strong potential is accompanied by increased volatility, especially against the USD. A latent divergence exists between the enthusiasm on paper and the reality of the fundamentals.
For example, despite Ethereum’s speculative appeal among institutional investors, the network still suffers from scalability problems. The limitations of proof-of-work could compromise its long-term ambitions.
As for Cardano, its DeFi ecosystem is struggling to take off, with very few concrete applications to date. Some criticize the gap between the stratospheric valuation of ADA and the real usefulness of the network.
Clearly, behind the hype around Bitcoin ETFs, many uncertainties remain about the real potential of altcoins to transform finance. Before investing blindly, a rational analysis of the fundamentals is essential. Driven by strong speculative potential, altcoins like Ethereum and Cardano attract institutional investors. But be careful not to overpay for promises that remain to be fulfilled.
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