Gate Research Institute | Institutional Investors Accelerate Encryption Layout: Trends, Drivers and Strategies

Introduction

After experiencing industry restructuring, a crisis of trust, and policy cleansing from 2022 to 2024, the crypto market in 2025 ushered in a new round of transformation led by institutions. As the regulatory framework becomes clearer and compliant channels are fully opened, crypto assets are gradually shedding the label of "marginal assets" and becoming a "core allocation" in the portfolios of an increasing number of institutions.

The rise of this round of "institutionalization" is driven by a series of landmark policies and market events:

• The passage of the "Genius Act" and the SEC's formal approval of spot Bitcoin ETFs in 2024 (including giants like BlackRock, Fidelity, ARK, etc.) marks the full opening of mainstream compliant entry channels;
• The Hong Kong "Stablecoin Regulation" has been introduced, establishing a licensing system for stablecoin issuance and creating an Asia-leading regulatory framework for crypto assets.
• The comprehensive implementation of the European MiCA regulation has unified the regulation of stablecoins and crypto assets within the EU, laying a legal foundation for cross-border institutional investment;
• The Russian Ministry of Finance has stated support for bringing cryptocurrency assets "out of the shadows" and opening compliant trading channels for high-net-worth investors;
• Traditional financial institutions are actively entering the market, with BlackRock, Franklin Templeton, Nomura, Standard Chartered Bank, and others successively laying out plans for digital asset management, custody, payment, and underlying infrastructure.

The clarification of regulations has driven the recovery of market confidence and the restructuring of capital. According to the "Institutional Digital Assets Survey" published by EY-Parthenon in 2025, over 86% of institutional investors globally have indicated that they have participated in or plan to invest in crypto assets within the next three years. Research by Nomura also shows that more than half of institutions in Japan have incorporated digital assets into their strategic vision.

In this context, this report will systematically sort out the motivations of institutional investors in allocating crypto assets, focusing on the evolution of their investment strategies, the differentiation of allocation paths, and the transformation of market participation methods, as well as revealing the structural opportunities in the crypto asset market during the "institutional era" through case analysis.

Reasons for Institutional Entry

Digital assets have gradually evolved from being regarded as "highly volatile" and "high-risk" fringe assets to an important allocation that cannot be ignored in institutional portfolios. According to multiple survey data, over 83% of institutional investors plan to continue or increase their allocation to digital assets by 2025, with a significant proportion intending to "substantially increase" their investments. The motivation behind institutional investors' allocations stems from the unique asset characteristics of digital assets, as well as benefits from the maturity of technological infrastructure and confidence in future technological trends.

2.1 High Return Rate and Diversified Risk

Since 2012, the return rates of cryptocurrencies such as BTC have significantly outperformed traditional assets like gold, silver, and the Nasdaq, with BTC's average annualized return reaching 61.8%, while traditional institutional investment portfolios are facing diminishing marginal returns. Especially in the post-pandemic era, high inflation and uncertainty in policy interest rates have led institutions to prefer seeking low-correlation assets.

Research shows that the correlation coefficient between BTC and stocks has averaged below 0.25 over the past five years, and its correlation with gold has also dropped to the range of 0.2-0.3, while its relationship with currencies and commodities in emerging markets (such as Latin America and Southeast Asia) is becoming more independent. This makes crypto assets an important tool for pursuing excess returns, hedging systemic risks, and optimizing the Sharpe ratio.

Strategic Demand for Inflation Hedge and Fiat Currency Devaluation Risk 2.2

Since the global quantitative easing that began in 2020, the prices of major asset classes in the world's leading economies have generally risen, and inflation has become the number one challenge for global investors. Crypto assets (especially BTC), with their technical attribute of a "fixed total supply of 21 million coins," are seen as "digital gold," particularly suitable as a tool for hedging against the depreciation risk of fiat currencies. BlackRock's Chief Investment Officer Rick Rieder has publicly stated: "In the long run, BTC is more like a store of value rather than a pure medium of exchange."

2.3 Infrastructure and Settlement Efficiency Improvement

For a long time, one of the core concerns of institutional investors regarding crypto assets has been their opaque settlement processes, lack of custody standards, and excessive counterparty risk. The early form of the crypto asset market resembled "shadow finance," lacking central clearing systems, regulated custodians, and standardized risk control mechanisms found in traditional finance. This results in high uncertainty regarding the safe custody of funds and post-trade asset settlement, especially for institutions dealing with large amounts of capital; this "uncertainty" itself poses a high risk.

However, in the past few years, there has been a qualitative leap in the infrastructure construction of the entire crypto asset market, especially in the following key areas:

• Custody services enter the compliance track Currently, several custody service providers have obtained trust licenses granted by financial regulatory agencies to provide compliant asset custody services for institutional clients. For example, Fidelity Digital Assets offers end-to-end custody and trading solutions for institutional clients and has expanded some services to the Asian and European markets. These institutions can not only achieve traditional security mechanisms such as cold wallet isolation and multi-signature management, but also enhance the trust level of fund storage with insurance solutions, anti-attack systems, and real-time audits.

• The clearing system and matching mechanism are becoming more specialized. In terms of trading, the original CEX and OTC off-exchange trading processes often suffer from delays and counterparty default risks due to the lack of a clearing intermediary. Trading platforms and financial institutions like Gate have begun to introduce settlement and matching mechanisms that are closer to traditional finance.

• Improved settlement efficiency leads to cost reduction and upgraded risk control In traditional markets, cross-border payments and securities clearing often take several days and are costly. The on-chain settlement mechanism in the crypto market inherently has advantages of high efficiency and low dependency on intermediaries. Combined with the custody and clearing infrastructure mentioned above, it can achieve T+0 trading clearing efficiency and a 24/7 operation mechanism, breaking the time constraints of traditional financial markets and supporting the synchronized circulation of global assets.

2.4 Technology-Driven Future Business Participation

Institutions entering the crypto market is also a strategic choice to "bet on the future direction of technology." Emerging fields such as Web3, DeFi, and RWA may reshape the ways financial services are provided and the forms of assets.

For example:

• Swiss banks are participating in the issuance of RWA on-chain bonds.
• Citibank launched a tokenized deposit experimental platform.
• JPMorgan Chase has deployed the Onyx project to achieve on-chain enterprise settlement.

In these transformation processes, early participants have a first-mover advantage.

2.5 Customer Demand and New Generation Asset Preferences

Many institutional investors, especially pension funds and insurance companies, are experiencing a "generational shift" in their audience structure. Generation Z and millennials are more familiar with digital assets, forcing institutions to reassess their allocation models. Fidelity's 2024 report indicates that nearly 60% of millennial clients want their retirement accounts to include BTC or ETH. This change accelerates the diversification and popularization of institutional products.

Institutional Investment Strategy Analysis

With the gradual institutionalization of the crypto market and the maturation of asset structures, the participation methods of institutional investors are becoming increasingly diversified. From "tentative positions" to "portfolio strategy construction," institutional investment is showing significant characteristics of stratification, strategization, and structuring. This chapter systematically reviews the typical entry strategies and asset preferences of different institutions in crypto asset investment from three dimensions: types of institutions, operational styles, and allocation paths.

3.1 Classification by Institution Type: Heterogeneous Driven Strategy Structure

Institutional investors are not a homogeneous group, but rather a composite ecosystem made up of different risk preferences, allocation goals, and liquidity needs. Typical representatives include family offices, pension funds/sovereign wealth funds, and university endowments, all of which exhibit highly differentiated investment paths in the cryptocurrency market.

3.1.1 Family Offices

• Possesses a high risk tolerance and acceptance of asset innovation, with flexible allocation targets;
• Prefer early-stage token projects, crypto-native venture funds, on-chain yield strategies;
• Prefer direct holding of tokens, participating in token private placements, or investing indirectly through Web3 funds.

Case: Multiple family offices in Singapore and Switzerland are actively participating in seed round financing for Ethereum staking services and Web3 infrastructure projects (such as Rollup and oracles).

3.1.2 Pension Funds / Sovereign Wealth Funds

• Pursuing long-term stable returns and macro hedging capabilities, with a conservative allocation style;
• More inclined towards compliant products, such as spot ETFs and bond-type RWAs (Real-World Assets);
• Typically gain indirect exposure to crypto assets through large asset management platforms (such as BlackRock, Fidelity).

Case: Norway's sovereign wealth fund Norges Bank disclosed in its 2024 annual report that it holds equity in Coinbase and BTC ETF products, marking a move by sovereign funds to allocate digital assets through equity pathways.

3.1.3 University Endowment Funds and Institutional Funds (Endowments & Foundations)

• Configure logic to be driven by technological innovation and cutting-edge trends;
• Participate through well-known Web3 funds (such as a16z crypto, Paradigm, Variant);
• More inclined towards early-stage investments, including Layer2, privacy computing, AI+Crypto, etc.

Case: Harvard, MIT, Yale, and other endowment funds have long-term investments in Web3 funds, with high participation in data composability and foundational protocol layers.

3.2 Classification by Operating Style: Coexistence of Active and Passive Strategies

The operational styles of institutions regarding cryptocurrency assets can be broadly divided into active management and passive allocation types, reflecting differentiated preferences for risk-return structures and operational resource investment.

3.2.1 Active Configuration Strategy

• Build your own investment research team, deeply participate in on-chain data analysis and off-chain valuation modeling;
• Strategies cover arbitrage, Staking, DeFi liquidity mining, Gamma (volatility) strategies, protocol governance, etc.;
• Emphasize strategic flexibility and capturing opportunities at the forefront of the track, the investment structure usually involves multi-chain, multi-asset, and cross-protocol combinations.

Example: Franklin Templeton has built a crypto fund management platform, offering services such as Staking-as-a-Service and DeFi liquidity deployment, which is a typical representation of the institutional implementation of active strategies.

3.2.2 Passive Configuration Strategy

• Prefer to hold indirectly through forms such as ETFs, structured notes, and fund shares;
• Emphasize the controllability of net value fluctuations and the transparency of risk exposure;
• The focus is on high market cap assets such as BTC and ETH, with occasional strategies for stablecoin yield.

Example: The "Multi-Asset Digital Index Fund" launched in 2025 is favored by pension funds and insurance institutions to build a low-correlation asset pool.

3.3 Divided by configuration path and asset preference: from "buying coins" to "building systems"

In actual investment operations, institutions no longer view crypto assets as a single target, but instead construct asset sub-systems through strategic combinations. The main allocation paths can be summarized into three categories:

3.3.1 Mainstream Asset Allocation (BTC / ETH)

• As the core asset of "digital gold" and "Web3 operating systems", mainstream coins make up the foundation of most institutional asset pools;
• BTC usually serves as a store of value and an inflation hedge;
• ETH represents a structural bet on on-chain economies, DeFi, RWA, and other ecosystems.

3.3.2 Track Theme Configuration

• Focus on high growth, high Beta emerging directions, such as Layer2 (Arbitrum), modular blockchain (Celestia), AI-driven protocols (Bittensor), decentralized storage (Arweave);
• The investment methods mainly focus on early private placements and fund share subscriptions, suitable for institutions with a high risk tolerance;
• Often used to capture structural dividends and mid-to-long term return potential.

3.3.3 Infrastructure and Compliance Service Configuration

• The configured subjects include equity of compliant custodial institutions (such as Anchorage), on-chain risk control platforms, and DePIN (Decentralized Physical Infrastructure Network);
• Considered as non-coin assets with policy moats and long-term technological value;
• Suitable for institutional investors such as sovereign funds and university endowments that have strategic expectations for "cryptocurrency ecosystem infrastructure."

3.4 Summary: Structured Evolution of Strategy Lineage

Through a three-dimensional cross-analysis of institutional types, operational styles, and configuration paths, it can be seen that institutional investment in crypto assets has far surpassed the "buying coins" level. Instead, it is focused on constructing a structured asset allocation system of "multi-strategy, multi-path, and cross-track." The evolution of this strategic lineage reflects not only the institutions' upgraded understanding of asset properties and macro logic but also their deep involvement in technological pathways, governance structures, and policy trends.

In the future, as compliant products continue to diversify and infrastructure matures further, the strategy spectrum of different types of institutions will become more diversified and trend towards fine layering, establishing a stable anchor position for crypto assets in the global asset allocation system.

Representative Case

In the past year, institutional interest in cryptocurrency assets has continued to grow, with several publicly traded companies and investment institutions increasing their allocations to mainstream crypto assets such as Bitcoin (BTC) and Ethereum (ETH) through direct purchases, increasing holdings, or long-term retention. This trend not only reflects the recognition of traditional financial capital for the crypto market but also highlights the potential of assets like Bitcoin in inflation hedging and asset diversification.

4.1 Strategy

MicroStrategy (NASDAQ: MSTR) was originally a traditional technology company primarily focused on business intelligence (BI) software, founded in 1989, and has long concentrated on enterprise data analysis and reporting services. Despite having a product range covering multiple large enterprise clients, its main business has experienced slow growth over the past decade, facing growth bottlenecks in revenue scale and profitability. In the context of changes in the macro environment, intensified inflationary pressures, and declining returns on fiat assets, the company's management began to rethink the structure of the balance sheet and the efficiency of capital allocation. In 2020, under the leadership of then-CEO Michael Saylor, MicroStrategy embarked on a highly controversial yet forward-looking strategic transformation: adopting Bitcoin as the company's primary reserve asset.

In August 2020, MicroStrategy purchased 21,454 BTC for $250 million for the first time, and subsequently increased its total holding to over 620,000 BTC through multiple rounds of purchases between 2020 and 2024, with a total acquisition cost of more than $21 billion. It is worth noting that this series of purchases did not rely solely on the company’s own funds but implemented a "financing and leverage" strategy through a series of capital market instruments (including issuing convertible bonds, private placements, ATM stock financing, etc.) to amplify the asset exposure and yield potential of BTC. This mechanism not only effectively leverages market funds but also gradually transforms MicroStrategy into a "Bitcoin Proxy," with its stock price highly positively correlated with BTC, making it seen by investors as an early alternative to ETFs.

The "corporate holding + market financing + BTC asset revaluation" combination strategy has had a profound impact on MicroStrategy's business landscape. The Q2 2025 financial report shows that although the software main business remains stable, the book appreciation of BTC holdings has become the company's main source of profit; the company's quarterly net profit reached as high as 10 billion USD, and the stock price increased by more than 39% within the year. This result not only reshaped its image in the capital market but also significantly enhanced the company's liquidity and balance sheet strength.

At the beginning of July 2025, Strategy announced the acquisition of 21,021 BTC for $2.46 billion, bringing its total Bitcoin holdings close to a historical high. However, in the following two weeks, Strategy did not release any new purchase information, leading the market to widely speculate that its accumulation plan might be temporarily slowed down. This change in strategy rhythm also reflects the flexibility and risk control awareness of institutions in responding to market fluctuations.

As the first publicly traded company to hold a large amount of cryptocurrency assets, MicroStrategy has pioneered a new path of "using Bitcoin as the underlying corporate asset." Its successful experience has provided a template for later entrants (such as Tesla, Square, Nexon, etc.) and has sparked broader discussions on "how cryptocurrency assets can optimize corporate asset allocation structures." From the perspective of traditional enterprises, MicroStrategy's approach is not merely an investment behavior, but a comprehensive strategic choice to combat macro inflation, reconstruct capital efficiency, and seek market repricing. Currently, with the launch of Bitcoin spot ETFs and the continuous expansion of institutional entry channels, MicroStrategy's "corporate holding of coins" paradigm is transitioning from an individual case to a systemic trend, providing a solid example for the institutionalization process of the entire cryptocurrency market.

4.2 Bitmine

According to a report by Bloomberg, Bitmine currently holds approximately 833,000 ETH, with a market value of nearly $3 billion, making it one of the largest institutional holders of Ethereum. Bitmine's strategy is significantly different from traditional Bitcoin-heavy companies, as its heavy investment in ETH indicates its optimism about Ethereum's future ecological potential in areas such as smart contracts, L2 scaling, and asset tokenization.

4.3 Metaplanet

The Japanese listed company Metaplanet recently increased its holdings by 463 BTC, with a total transaction amount of approximately $53.7 million, further enhancing its total position. As a representative emerging Bitcoin investor in the Asian market, Metaplanet's ongoing strategy not only responds to the gradually clearer trend of digital asset regulation in Japan but may also inspire more Asian companies to undergo asset allocation transformation.

4.4 Sequans and GameSquare

Apart from Bitcoin, some enterprises have also begun to invest in other mainstream crypto assets. Sequans recently added 85 BTC, bringing its total holdings to 3,157 BTC, while GameSquare increased its holdings by 2,717 ETH, raising its total to 15,630 ETH. This indicates that some institutions are attempting to optimize their crypto asset portfolios by diversifying their allocations between BTC and ETH. Furthermore, an increasing number of companies are starting to pay attention to emerging projects like Solana, reflecting a growing interest in the "new public chain" sector.

Future Trends

With the clarity of the policy environment and the maturity of infrastructure, institutional investors are entering the crypto market at an unprecedented speed and depth. This trend is not a temporary whim, but a strategic choice based on macro hedging needs, portfolio optimization goals, and expectations of technological dividends. The "non-correlation" characteristics of crypto assets, high potential return space, and the increasing importance of underlying blockchain technology in financial infrastructure together constitute the fundamental driving forces for institutional involvement.

From an investment perspective, despite the high volatility in the crypto market, mainstream assets (such as Bitcoin and Ethereum) have demonstrated relatively robust long-term returns over the past few cycles. The rapid increase in ETF product volumes, the returns of on-chain fund strategies exceeding expectations, and the relative resilience of multi-strategy funds in low-correlation market environments all validate the effectiveness of institutional capital allocation.

In the future, the participation of institutional investors in the cryptocurrency market will become increasingly diversified and systematic. From the introduction of ETFs and structured products, to the combination of RWA and on-chain securities issuance, to becoming operators of ecosystem nodes and protocol governors, and even realizing the "model as investment" logic through AI model-driven on-chain strategy execution platforms—this all indicates that the cryptocurrency market is transitioning from a stage of capital injection to a deeper institutional embedding and governance reconstruction.

In this transition process, pioneering institutions will not only be financial investors but also the designers and promoters of a new financial order. Crypto assets are no longer a playground for speculators but will become an indispensable part of the modern financial system.
References

• Ey, https://www.ey.com/content/dam/ey-unified-site/ey-com/en-us/insights
• Our World Data, https://ourworldindata.org/grapher/consumer-price-index
• Stocklight, https://stocklight.com/stocks/us/nasdaq-mstr/microstrategy/annual-reports
• Bitbo, https://bitbo.io/treasuries/historical

Disclaimer Investing in the cryptocurrency market involves high risks, and it is recommended that users conduct independent research and fully understand the nature of the assets and products they are purchasing before making any investment decisions. Gate does not bear any responsibility for any losses or damages resulting from such investment decisions.