Bitcoin and Ethereum Hold Steady as Risk Mitigates and Stablecoin Demand Grows

Analysis of crypto fund flows indicates that during market sell-offs, stablecoins can spike to nearly 30%, while Bitcoin and Ethereum consistently hold about 50% across different market cycles.

As markets shift towards a bullish trend, the risk appetite generally rises. This point was highlighted in a recent evaluation of trading activity on Finestel, a platform focused on crypto trading and portfolio management, which assists asset managers in automating their trading and monitoring across exchanges like Binance, Bybit, KuCoin, OKX, and Gate.io.

Data collected by the platform and shared with crypto.news reveals that leading asset managers prefer “core” cryptocurrencies, especially Bitcoin (BTC) and Ethereum (ETH), as prices increase.

In January, as Bitcoin approached $73,000 and Ethereum gained momentum after the Pectra upgrade, BTC and ETH collectively made up 57% of portfolio allocations. Simultaneously, investments in Solana (SOL), Avalanche (AVAX), and other layer-1 tokens rose to 21%, with stablecoin holdings dipping to 14%, reflecting a clear “risk-on” attitude.

By May, this allocation remained relatively stable, with BTC and ETH contributing 54%, while layer-1 tokens increased to 24%, DeFi held at 8%, and stablecoins stayed at 14%. This suggests that in strong up-markets, managers prefer to keep a solid focus on core tokens and major smart-contract chains.

However, February witnessed a notable sentiment shift, with BTC and ETH allocations falling to around 47%, a 10% drop since January. Meanwhile, stablecoin holdings surged to nearly 30%. This pullback indicates that managers likely turned to Tether (USDT) and USD Coin (USDC) for liquidity and protection against market downturns. Exposure to high-beta DeFi assets decreased from 8% to 5%, while layer-1 investments eased to about 20.5%, maintaining what the report refers to as “dry powder” for calmer market conditions.

Risk-managed baseline

During the sideways market movements in March, April, and June, allocations seemed more balanced. For instance, in March, BTC and ETH stabilized at 50%, while stablecoins accounted for 24.5%, with DeFi and layer-1 tokens fluctuating around 5% and 21.5%, respectively. This allocation reflects a cautious approach to yield strategies amid lower volatility.

April observed a minor return to risk; as prices approached new peaks, BTC and ETH rose to 52%, DeFi increased to 6%, and layer-1 tokens escalated to 23%. Stablecoin allocations fell to 19%, merging momentum strategies with income generation.

By June, following a slight decline, portfolios reverted to a structure akin to March, with Bitcoin and Ethereum back at 50%, stablecoins at 24.5%, DeFi at 6%, and layer-1 at 20.5%. This reestablishment of a more defensive posture suggests that managers remained prudent regarding further upward movements after the previous rally.

Finestel’s report underscores three persistent themes across all market conditions:

• Core Consistency. Bitcoin and Ethereum consistently anchor about half of most portfolios, serving as a “risk-managed baseline.”
• Dynamic Dry Powder. Stablecoin allocations vary between 14% and 30%, offering tactical liquidity for opportunistic purchases or hedging against downturns.
• Selective Growth. Allocations to DeFi and layer-1 tokens expand during bullish or cooling periods targeting yield and tactical alpha, yet are reduced during risk-off phases.

Nevertheless, these insights may not be universally applicable. The report does not identify specific firms or their performance aims, and it is uncertain how factors like rebalancing frequency or fee structures might affect these outcomes. For everyday investors, this isn’t necessarily a clear-cut guide.

Additionally, Bybit’s figures from a recent research report reinforce a similar sentiment but with an interesting twist. They show that Bitcoin’s share within wallets has climbed to nearly 31%, up from about 25% in November. Despite the year’s fluctuations, investors continue to gravitate toward BTC as their chosen asset.

Furthermore, XRP has quietly ascended to the third position among non-stablecoin assets, overtaking Solana, which has seen a share decline of roughly one-third since last fall. It’s not just individual traders making this shift; institutions hold nearly 40% of their assets in Bitcoin, compared to about 12% for retail investors, illustrating BTC’s dual role as a favored choice among everyday buyers and a macro hedge for larger entities.