Crypto: Ethereum and Cardano the new favorites?

The recent frenzy around Bitcoin ETFs has somewhat overshadowed a burgeoning movement: the growing interest of institutional investors in altcoins. Yet, in the media shadow of the crypto queen, assets like Ethereum and Cardano are attracting substantial capital. Driven by solid fundamentals and a high potential for gains, they are becoming the new favorites of fund managers.

Institutional Investors Seeking Returns Beyond Bitcoin

Despite the record flows into Bitcoin ETFs last month, all eyes are not fixed on Bitcoin. Behind the scenes, institutional investors are discreetly diversifying their crypto exposure. The goal: to take advantage of the superior potential offered by well-chosen altcoins. 

According to a recent study by CoinShares, Ethereum and Cardano are among the most favored. In 2024 alone, ETH witnessed inflows of $16 million while ADA attracted $6 million. These amounts might be modest compared to the billion invested in Bitcoin, but they reveal an emerging trend.

Several factors explain this interest in altcoins. On one hand, these crypto assets offer a lower valuation than Bitcoin, and therefore a higher margin of growth in the long term. On the other hand, their use cases in DeFi or smart contracts suggest a strong potential for adoption. By betting on ETH and ADA, institutional investors are wagering on the cryptos of tomorrow.

The Underlying Risks Associated with Altcoins 

However, this quiet rush towards altcoins is not without danger. Their high potential comes with increased volatility, especially against the USD. A latent divergence exists between the enthusiasm on paper and the reality of the fundamentals. 

For example, despite the speculative appeal of Ethereum among institutional investors, the network still struggles with scalability issues. The limitations of proof-of-work could compromise its long-term ambitions.

As for Cardano, its DeFi ecosystem struggles to take off, with very few concrete applications to date. Some criticize the stark discrepancy between ADA’s stratospheric valuation and the actual utility of the network.

In summary, behind the media hype around Bitcoin ETFs, numerous uncertainties remain regarding the real potential of altcoins to transform finance. Before blindly investing, a rational analysis of the fundamentals is essential. Driven by strong speculative potential, altcoins like Ethereum and Cardano are attracting institutional investors. But beware of overpaying for promises that have yet to be materialized.