Asset Allocation (Q3 2024) – Bitcoin Strengthens Its Dominance as Lower-Ranking Tokens Lose Market Share

Overall Market Overview

Key Highlights:

• As of August 2024, Bitcoin remains the largest single asset held by all users, accounting for 27.5% of their total assets (up from 25.7% in April 2024).

• Excluding stablecoins, 67% of users’ crypto investments are allocated to Bitcoin and Ether, compared to 61% in April 2024, shortly after the Bitcoin halving.

• This increase in concentration can be attributed to investors' growing preference for Bitcoin, while Ether's asset allocation percentage has remained stable.

• Finally, Solana is the third-largest asset held by users, with its percentage growing consistently throughout 2024.

Bitcoin: The Cornerstone of Crypto Investment

Bitcoin remains the leading cryptocurrency, constituting 27.5% of total user assets as of August 2024, up from 25.7% in April. This increase highlights growing confidence among investors, particularly following the Bitcoin halving event in April 2024, which spurred substantial institutional interest. Institutional traders (INS) hold the largest percentage of Bitcoin at 28.9%, followed by VIP traders at 28.0% and retail traders at 16.3%. 

Ether: Stability Amid Uncertainty

Ether (ETH), while still a significant asset, accounts for approximately 8.97% of total user holdings. Despite the anticipated boost from the launch of Ether Spot ETFs, which were approved in mid-2024, Ether's allocation percentage has remained relatively stable. The market’s response to these ETFs has been disappointing, resulting in net outflows of $568 million since their launches. 

Ether's underperformance, as compared to Bitcoin and Solana, may be linked to broader market sentiments and competitive pressures. Nonetheless, Ether's consistent presence in portfolios highlights its importance, especially for long-term investors looking for fundamental value in the cryptocurrency space.

Solana: The Rising Star

Solana has emerged as a compelling alternative to Bitcoin and Ether, becoming the third-largest asset held by users. As of August 2024, Solana holdings have surged, particularly among retail investors, who increased their positions by 33.3% in July as compared to June. This growth was fueled by optimism around potential Spot ETF approvals and the expanding decentralized finance (DeFi) ecosystem on the Solana platform. 

Solana’s increasing revenue and trading volume have drawn positive attention, positioning it as a potential blue chip asset in the post-FTX landscape. The success of liquid staking and DeFi projects on Solana further strengthens its appeal to investors.

Altcoins: Declining Interest and Emerging Risks

Our report indicates a notable decline in altcoin allocations, which have dropped to a six-month low. This decrease is being driven largely by heightened volatility and a shift toward more established assets like Bitcoin and Solana. While top-performing altcoins have maintained relative stability, newer and non-top assets have struggled to attract investment. 

Retail investors have shown interest in meme tokens, which have spiked in popularity despite weak price action. This trend suggests a segment of the market is still willing to explore high-risk opportunities. However, the overall decline in altcoin holdings emphasizes a cautious approach among investors as they navigate uncertain market conditions.