Institutional investors are increasingly bullish on cryptocurrency, with 83% saying they plan to up crypto allocations in 2025, according to a March 18 report by Coinbase and EY-Parthenon. 

Already, nearly three-quarters of firms surveyed said they hold cryptocurrencies other than Bitcoin (BTC) and Ether (ETH), and a “significant majority” said they plan to boost crypto allocations to 5% or more of their portfolios, the report said. 

They are motivated by the view that “cryptocurrencies represent the best opportunity to generate attractive risk-adjusted returns over the next three years,” according to the report.

Coinbase, the US’ largest crypto exchange, and EY-Parthenon, a consultancy, based the findings on interviews with more than 350 institutional investors in January. 

Among institutional altcoin holdings, XRP (XRP) and Solana (SOL) are the most popular, the survey found. 

Coinbase and EY-Parthenon surveyed more than 350 financial institutions on crypto. Source: Coinbase

Related: Stablecoin adoption, ETFs to propel crypto performance in 2025: Citi

Altcoin ETFs incoming

Altcoin holdings could rise even further if US regulators approve planned exchange-traded fund (ETF) listings this year.

Asset managers are awaiting a greenlight from the US Securities and Exchange Commission to list more than a dozen proposed altcoin ETFs. 

Litecoin (LTC), SOL and XRP are seen as the most likely to see near-term approval, according to Bloomberg Intelligence. 

On March 17, the Chicago Mercantile Exchange (CME) Group, the largest US derivatives exchange by volume, launched futures contracts tied to SOL, marking a significant step toward institutional adoption of the altcoin. 

Stablecoins and DeFi take off

Meanwhile, stablecoins continue to see institutional uptake, with 84% of respondents either holding stablecoins or exploring doing so, the survey found. 

According to the report, institutions are using “stablecoins for a variety of use cases beyond just facilitating crypto transactions, including generating yield (73%), foreign exchange (69%), internal cash management (68%), and external payments (63%).”

In December, investment bank Citi said stablecoin adoption will accelerate onchain activity, including in decentralized finance (DeFi). 

The survey found that only 24% of institutional investors currently use DeFi platforms, but that figure is expected to grow to nearly 75% in the next two years. 

“Institutions are attracted to DeFi for myriad reasons, citing derivatives, staking, and lending as the use cases they are most interested in, followed closely by access to altcoins, crossborder settlements, and yield farming,” the report said.

Magazine: Bitcoin dominance will fall in 2025: Benjamin Cowen, X Hall of Flame

At the start of the week, Bitcoin (BTC) price succumbed to pressure from sellers, declining from $84,500 on March 17, to $81,300 at the time of writing. This downward movement was most likely a sell-off related to the Federal Open Market Committee’s (FOMC) two-day meeting, which takes place on March 18-19.

Federal Open Market Committee (FOMC) meetings tend to act as market resets. Each time the FOMC meets to deliberate on US monetary policy, crypto markets brace for impact.

Historically, traders de-risk and reduce leverage ahead of the announcement, and after the meeting and press conference from Federal Reserve Chair Jerome Powell the markets can be equally reactive.

The press release of the current FOMC meeting scheduled for Wednesday, March 19, at 2:30 pm ET, and it could trigger major movements in the Bitcoin market. Analyzing market behavior leading to its release could offer clues about Bitcoin’s next move. 

To traders, FOMC means volatility

Traders are closely monitoring the FOMC minutes for any shifts in the Fed’s stance on inflation and interest rates. 

After the FOMC announcement, Bitcoin price tends to react sharply. Since the beginning of 2024, BTC prices mostly declined after the FOMC decided to maintain rates, as can be seen on the chart below. 

The notable exception was the pre-halving rally of February 2024, which also coincided with the launch of the first spot BTC ETFs. When US interest rates were cut on September, 18, 2024 and November 7, 2024, Bitcoin rallied.

However, the third cut on December 18, 2024, did not yield the same result. The modest decrease by 25 basis points to the 4.50%–4.75% range marked the local Bitcoin price top at $108,000.

BTC/USD 1-day chart with FOMC dates. Souce: Marie Poteriaieva, TradingView

Markets deleverage before FOMC, except this time

A key indicator that provides insight into market sentiment is Bitcoin open interest—the total number of derivative contracts, mostly $1 perpetual futures, that have not been settled.

Historically, Bitcoin open interest falls before FOMC meetings, showing that traders are reducing leverage and risk exposure, as per the graph based on CoinGlass data.

Bitcoin futures open interest and FOMC dates. Source: Marie Poteriaieva, CoinGlass

However, this month another pattern has emerged. Despite Bitcoin’s $12 billion open interest shakeout earlier this month, in the days preceding the FOMC there was no noticeable decrease in Bitcoin’s open interest. BTC price, however, declined, which is unusual and could indicate a strong directional bet.

This could also be a sign that traders feel less anxiety about the Fed’s decision, possibly expecting a neutral outcome. Supporting this view, CME Group’s FedWatch tool indicates a 99% probability that the Fed will maintain rates at 4.25%–4.50%.

If the rates remain unchanged, it is possible that Bitcoin price will continue its current downtrend. This may be exactly what the HyperLiquid whale was hoping for when it opened a 40x leveraged short position worth over $500 million at its peak. However, this position is now closed.

Related: Bitcoin stalls under $85K— Key BTC price levels to watch ahead of FOMC

How are the spot Bitcoin ETFs reacting?

Unlike Bitcoin whales, investors in the spot Bitcoin ETFs have historically offloaded BTC holdings before FOMC meetings. 

Since the spot BTC ETFs launched in January 2024, most FOMC events have coincided with ETF outflows or, at best, modest inflows, according to CoinGlass data. The notable exception was the previous all-time high of January 2025, when even the spot Bitcoin ETF investors couldn’t resist the urge to buy.

Bitcoin spot ETF net inflows and FOMC dates. Source: Marie Poteriaieva, CoinGlass

On March 17, the spot Bitcoin ETFs saw $275 million in net inflows, marking a shift from a month of outflows. This may signal a shift in investor sentiment and expectations regarding the Fed’s policy decisions.

If spot ETF inflows are rising before the FOMC, investors might be anticipating a more dovish stance from the Fed, such as signaling future rate cuts or maintaining liquidity-friendly policies.

Investors could also be loading up on Bitcoin as a hedge against uncertainty. This suggests that some institutional investors believe Bitcoin will perform well regardless of the Fed’s decision.

Investors could also be anticipating a possible short squeeze. If traders were expecting Bitcoin to drop and positioned short, a sudden increase in ETF inflows could play a role in traders’ behaviors and trigger a short squeeze.

Following the FOMC, BTC’s price action, along with onchain data and spot ETF flows will show whether the recent activity was part of a long-term accumulation trend or just speculative positioning. 

However, one thing that many traders agree on now is that BTC could experience a significant price movement after the FOMC announcement. As crypto trader Master of Crypto put it in a recent X post: 

“The FOMC is tomorrow, and a Big Move is expected.” 

Even without rate cuts, the chance of the Fed issuing dovish statements could lift markets, while the absence of them could drive prices lower.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

Bo Hines, the executive director of the President’s Council of Advisers on Digital Assets, said comprehensive stablecoin legislation is expected to be finalized in the coming months, underscoring the government’s urgency to maintain the US dollar’s dominance in onchain activity. 

Speaking at the Digital Asset Summit in New York on March 18, Hines said stablecoin legislation is “imminent” following the Senate Banking Committee’s approval of the GENIUS Act last week. 

The GENIUS Act, which is an acronym for Guiding and Establishing National Innovation for US Stablecoins, establishes collateralization guidelines for stablecoin issuers and requires full compliance with Anti-Money Laundering laws. 

“We saw that vote come out of the Senate Banking Committee in extremely bipartisan fashion, […] which was fantastic to see,” said Hines, adding:

“I think our colleagues on the other side of the aisle also recognize the importance for US dominance in this space, and they’re willing to work with us here, and that’s what’s really exciting about this. You know, there’s not many issues in Washington, DC, in which folks can come together from both sides of the aisle and really propel the United States forward in a way that’s comprehensive.”

Bo Hines (right) speaking at the Digital Asset Summit on March 18. Source: Cointelegraph

When asked about when stablecoin legislation will be passed, Hines said, “I think that stables could be on the president’s desk here in the next two months.”

Right now, the market seems to be underestimating what this bill “could do for the US economy in terms of US dollar dominance, in terms of payment rails, in terms of altering the course of financial markets,” said Hines.

Related: Banks push to block stablecoin legislation over market share fears

Extending the dollar’s hegemony

The US dollar accounts for the vast majority of the $230 billion worth of stablecoins in circulation, suggesting that the greenback remains the currency of choice for funding cryptocurrency accounts and sending remittances overseas. 

Some industry experts believe this will change in the future as stablecoins become multicurrency, but so far, digital dollars remain the overwhelming favorite.

Dollar-denominated stablecoins dominate the market. Source: DefiLlama

US Treasury Secretary Scott Bessent said the Trump administration will use stablecoins to maintain the dollar’s status as the global reserve currency, which partly explains the sense of urgency to push legislation over the finish line.

“We are going to put a lot of thought into the stablecoin regime, and as President Trump has directed, we are going to keep the US [dollar] the dominant reserve currency in the world, and we will use stablecoins to do that,” Bessent told the White House Crypto Summit on March 7.

Treasury Secretary Scott Bessent pictured alongside President Donald Trump at the White House Crypto Summit on March 7. Source: The Associated Press

Magazine: Unstablecoins: Depegging, bank runs and other risks loom