The recent Q2 Asset Allocation report from Bybit sheds light on the evolving investment landscape in the cryptocurrency market, particularly regarding stablecoins, Bitcoin, Ethereum, and altcoins.

One significant finding is the decline in stablecoin holdings among both institutional and retail investors, dropping from 50.2% in December to 42.8% in May. This trend suggests a shift in investor sentiment away from stablecoins towards other crypto assets.

Bitcoin remains the dominant asset, comprising 26% of total assets among Bybit users as of May 2024. When excluding stablecoins, Bitcoin and Ethereum together make up 61% of users' crypto investments, indicating the enduring popularity of these two leading cryptocurrencies.

Despite the growing optimism surrounding Ethereum Spot ETFs, retail traders continue to show a preference for Bitcoin over Ethereum. Institutional investors also favor Bitcoin, with higher concentrations of holdings in BTC compared to ETH.

Following the SEC's approval of Bitcoin Spot ETFs in January 2024, institutional Bitcoin holdings have steadily increased, while Ether positions have seen a decline. This suggests that institutions perceive Bitcoin as a more attractive investment option, possibly due to concerns about Ether Spot ETFs not including staking rewards.

In contrast, retail traders demonstrated market timing skills during the March-April 2024 correction, reducing their Bitcoin positions in March and gradually adding them back in April and May, thereby capitalizing on the market rebound.

In terms of asset allocation strategies, institutions tend to hold more concentrated positions in Bitcoin and Ether, whereas retail traders have more diversified portfolios. However, both segments have shown increased concentration, with retail traders leaning towards new altcoins.

Altcoin holdings among users have seen fluctuations, influenced by changing trading narratives such as Bitcoin Layer 2 projects and meme tokens. Institutions have increased their altcoin positions in Q2 2024, primarily through investments in new tokens, while retail traders exhibit a stronger preference for altcoins, particularly meme tokens and Bitcoin Layer 2 projects.

Stablecoins continue to attract attention for their near-instantaneous transactions and low costs, with companies like PayPal and Stripe leveraging stablecoins for payments infrastructure. PayPal introduced its PYUSD stablecoin to facilitate instant and lower-cost transfers, while Stripe announced plans to allow merchants to accept stablecoins for online transactions, starting with USDC on multiple blockchains.