3 Digital Asset Trends Institutional Investors Want to Allocate to

Here is the most insightful digital asset chart I have seen last week when it comes to understanding what investors with sizeable check books are looking for when it comes to digital asset allocation.

This comes from the Coinbase-EY Patheron 2025 Institutional Investor Digital Assets Survey. If you are thinking about distributing tokenized financial products, this chart and report offer many interesting insights.

Instead of regurgitating 34 pages of content, I’ve distilled the 3 most important takeaways and mapped them to the 3 fastest-growing digital asset adoption trends.

Let’s break it down.

A word on the survey: the survey result is based on a survey of 352 investors who “are currently invested, previously invested, or planning to invest in digital assets or digital asset-related products in the next 12 months”

Geographically, they are 62% US-based and 28% EU + UK. AUM-wise, 66% of surveyed investors control $50B of AUM and 84% under $500B AUM.

Insight #1: regulated ETPs is the gateway

“60% of investors prefer to gain exposure to crypto through registered vehicles such as ETPs1, with high levels of interest in further innovation including diversified index funds, altcoin ETPs, and US based perpetual futures.”

Given Bitcoin's outperformance vs other asset classes in the past decade, it is perhaps not surprising to see a broadening of investor base that want to access the asset class.

From a market cap, track record and liquidity perspective, Bitcoin is in a class of its own, making up. And thus it remains the first port of call for institutional buy side.

With top US banks deepening their digital asset strategy and the Trump Administration embracing digital assets as a core financial policy, the institutional buy-side will see a surge of interest and demand. The record shattering $50B inflow into BlackRock’s Bitcoin ETF (IBIT) in 2024 looks like a taste of what is to come.

Insight #2: stablecoin businesses and use cases attracting capital

As I predicted in Stablecoin: the King of Digital Assets, stablecoins are breaking into the major league.

“84% of surveyed investors are either using them currently or are interested in doing so, Significant majorities of investors are using, or are interested in 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%).”

Stablecoin has historically served the crypto space as a store of value for traders. But now it is becoming an integral part of onchain finance - and that is bringing it adoption across more verticals:

• FX - the weak correspondent banking rails are already proving to be ripe for adoption. See how Standard Chartered backed Zodia Markets are doing brisk business in this area.

• Cash Management - JPMorgan’s tokenized deposit transaction volume is an early sign of how corporates will leverage the 24/6/365 and programmable nature of tokenized payment

• Payments - the string of stablecoin startups M&A and investment activities including the $2B stablecoin payments from Abu Dhabi sovereign wealth fund backed investment into Binance

Perhaps the MOST surprising number when it comes to institutional buyside’s interest in stablecoin is the 73% survey respondents' interest in using stablecoin for yield-generation.

This bodes well for onchain yield driven products and tokenized MMF products that can match stablecoins liquidity or offer easy instant stablecoin redemption. Just last week, BlackRock’s tokenized MMF, BUIDL saw a 127%, 8-figure surge in its AUM. You can learn more here.

Insight #3: tokenized financial products to see institutional sized inflows

“Driven predominantly by goals of portfolio diversification, 76% of firms intend to invest in some form of tokenized assets by 2026. 57% percent of surveyed respondents are interested in investing in tokenized assets, particularly alternative funds, to drive portfolio diversification”

Given the lack of demand for tokenized alternative funds, I am actually curious about the profile of the investors that said they want to invest in tokenized alternative funds to drive portfolio diversification. With the higher costs and friction associated with accessing tokenized funds for traditional buyside investors, what type of products they had in their minds when they said they would want to allocate for diversification.

What is becoming increasingly clear, however, is that tokenized money market funds (MMFs) are emerging as the go-to instrument for onchain buyside investors to manage idle cash. And if regulation catches up, tokenized MMFs could also become a powerful liquidity management tool for traditional market participants to leverage to unlock intraday liquidity.

While stablecoins are showing strong momentum with 10% YTD growth, tokenized MMFs are quietly outperforming—with a 20% surge.

Conclusion

Digital assets are no longer a fringe conversation, they are finally reaching the institutional scale-up phase. Numerous data points are flashing signals about strong market demand. The Coinbase-EY-Parthenon survey is the latest sign validation of this trend. 

The top 3 areas to keep an eye on are:

1. Bitcoin market cap growth

2. Stablecoin use cases outside trading

3. Tokenized financial products

All three are posting double-digit year-to-date growth — and we’re only through Q1. With distribution channels, technology infrastructures, and finally regulatory support taking shape, the foundation is being laid for the industry to go mainstream. 

Disclaimer: This content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.