Despite Bitcoin falling about 25% since the beginning of the year and its market value evaporating by over $1 trillion from its historical peak last October, traditional institutions' willingness to allocate to digital assets has not noticeably cooled.
At the iConnections capital conference held in Miami, more than 75 digital asset funds participated, with approximately 750 meetings between managers and allocation institutions, a scale close to the peak of the crypto market in 2022. Data from the iConnections platform indicates that about 25% of limited partners (LPs) currently express interest in digital asset strategies.
Ron Biscardi, CEO of iConnections, stated that digital assets have gradually shifted from being a peripheral allocation to a "core position" in alternative investments. The platform he manages covers assets exceeding $55 trillion, with a long-term focus on institutional fund trends.
Market analysts say that despite increased volatility in prices, there is a marginal improvement in institutions' attitude towards digital assets. The logic of fund allocation is shifting from short-term price-driven motives to a long-term need for asset diversification.
Family Offices Becoming Main Incremental Funds
Data shows that family offices are the LP group expressing the most interest. This group typically allocates to emerging asset classes earlier than pension and insurance funds. Individuals close to the wealth management industry say that in active regions for crypto assets like Dubai, Switzerland, and Singapore, traditional wealth management institutions face ongoing demand from clients for digital asset allocation.
Even amid the so-called "crypto winter," institutional participation has remained resilient. The stock prices of Coinbase and MicroStrategy (ticker MSTR) have significantly underperformed most tech stocks this year, with valuations facing phase compression. The forward P/E ratios of some digital asset-related companies have fallen more than 30% from their 2023 highs, reflecting increased risk premiums.
Analysts point out that there is a significant expectation gap in the current market: weak price performance but rising institutional allocation ratios. If the regulatory environment becomes clearer, valuation recovery may first appear in compliant fund managers and ETF products.
Regulation Remains a Core Variable
Biscardi stated that Bitcoin has essentially gained legitimacy at the institutional level, but the widespread allocation of altcoins is still constrained by regulatory uncertainty. "The regulatory framework is the final piece of the puzzle."
The trajectory of U.S. regulatory policy becomes a key variable. Several chief investment officers point out that compliance is a critical prerequisite for deciding whether to allocate. Large institutions, as fiduciaries, are highly sensitive to risk disclosure and compliance boundaries. In the current regulatory environment, direct token holdings remain rare, with more funds opting for indirect participation through ETFs or fund structures.
Data shows that some university endowment funds have begun small-scale allocations to Bitcoin and Ethereum ETFs, not to restructure their asset portfolios but to enhance potential return elasticity as equity asset returns slow.
Bitcoin Still Seen as a Risk Asset
Although some investors regard Bitcoin as "digital gold," asset behavior characteristics show that its correlation with U.S. stocks is higher than with gold. During market volatility, Bitcoin behaves more like a risk asset.
Biscardi noted that institutions position Bitcoin more as a high-volatility alternative asset rather than a safe haven. This pricing logic determines that it still belongs to the high-beta segment in asset allocation models.
However, investment in sponsorship and brand promotion has noticeably increased. BitGo, Galaxy Digital, Ripple, and Blockstream are major sponsors of the conference. The scale of industry investment shows that digital asset managers continue to bet on institutionalization paths.
At the macro level, with U.S. Treasury yields remaining high and liquidity conditions tightening, risk assets are generally under pressure. For digital assets to achieve sustained valuation recovery, regulatory certainty and the optimization of capital structures must resonate. At this stage, the increased institutional participation reflects structural marginal improvement, but the disparity between price performance and allocation scale still awaits the test of time.
