Navigating Bull and Bear Markets — A Dive Into Asset Allocation

Dive deep with us as we explore the first CEX-initiated research on user asset allocation using Bybit’s proprietary data. Discover valuable insights into how users adapt their trading strategies in bull and bear markets.

Our research centers around how traders respond to market volatility in terms of asset allocation, in particular in the volatile market since December 2022.

Gain valuable insights by examining the asset allocation of institutions, VIPs, and retail traders. Compare their trading behavior to yours and better understand how professionals navigate market volatility.

Portfolio Construction

Discover how institutional investors navigate the unpredictable market. With 45% of their assets in stablecoin, 35% in Bitcoin, and 15% in Ether, they strategically allocate their portfolios. 

One intriguing aspect is the emphasis on maintaining high levels of liquidity. Institutions use their cash balance as collateral for derivatives and to seize opportunities in distressed assets.

Also, this is not a diversified portfolio by the definition of traditional finance. Institutionals concentrate their risky asset investments on Bitcoin and Ether, with altcoins forming a small faction of the total portfolio. New investors should be cautious about this unique portfolio construction in cryptocurrency.

Bitcoin

Institutional traders nearly doubled their Bitcoin holdings in the first three quarters of 2023, going from around 30% to about 50%. This strategic move proved successful, as Bitcoin led the crypto rally in October.

Ether

Institutional investors have shown declining interest in Ether throughout the first nine months of this year. However, a recent rumor about BlackRock's spot Ether ETF application has the potential to spark renewed excitement among investors. 

An interesting development is that Ether has been outperformed by its competitor, Solana, which has grown tenfold since hitting its lowest point in 2022. Institutional traders may be awaiting a significant and impactful upgrade before diving back into Ether.

Stablecoin

The reason retail traders hold more stablecoin could largely be attributed to their lagging tactical allocation to risky assets. Nonetheless, new crypto investors should be aware of a remarkably higher cash balance among crypto investors compared to traditional investors, where traditional finance typically puts a single-digit percentage of total assets in cash.

Altcoin

It is interesting to notice that retail/VIP traders usually maintain a higher holding in altcoins than institutional investors. Nonetheless, they all put a small fraction of total assets into altcoins. New crypto investors shall be cautious of heavy investments into altcoins, where the ensued volatility might result in unintended losses.

Bybit’s Commitment to Helping You Navigate Bull and Bear Markets

As one of the leading crypto exchanges, Bybit takes pride in revolutionizing your trading experiences. Our trading tools, such as copy trading and the recently upgraded UTA suite, will continue to evolve. Discover more about UTA and copy trading here!

(insert button for pdf report)

https://drive.google.com/file/d/1UV08IZekMSKycCylGE25GydoIil8r2o1/view?usp=sharing

#LearnWithBybit