Institutional Investors Abandon Stablecoins for Altcoin Gamble

Investors on Bybit have shown a clear shift away from stablecoins in Q3 2025, with funds increasingly allocated toward altcoins such as Solana (SOL), XRP, and decentralized exchange (DEX) tokens. According to the exchange’s latest asset allocation report, stablecoin holdings plummeted from 42.7% in April to 25% in August, a drop of over 20% within four months. This trend is particularly pronounced among institutional investors, who reduced their stablecoin exposure from 55.7% in May to 17.2% by August, while retail traders still held 55.7% in stablecoins during the same period.

The decline in stablecoin dominance was accompanied by a rise in allocations to high-potential altcoins. Solana emerged as a major beneficiary, with its holdings reaching their highest levels of 2025. Investors are increasingly viewing Solana as a potential extension of institutional-grade strategies that have been applied to Bitcoin and Ethereum. This anticipation was further fueled by investments from traditional financial firms. For example, Forward Industries, a Nasdaq-listed company, secured $1.65 billion to bolster Solana’s treasury, and other firms like Sharps Technology are also stepping in with significant capital.

XRP also saw a surge in demand, becoming the third-largest non-stablecoin asset held on Bybit. The token has gained traction among institutional investors due to its inclusion in newly launched derivatives and ETF products, such as Grayscale’s Digital Large Cap Fund, which includes XRP alongside Bitcoin, Ethereum, and Solana. Meanwhile, XRP’s role in non-USD settlement rails is drawing interest in Asia-Pacific markets, where countries are exploring alternatives to US dollar-based financial infrastructure.

Beyond SOL and XRP, the report highlights a broader diversification into altcoins. DEX tokens experienced the most significant growth, with their share of holdings quadrupling from 0.4% in June to 1.8% in August. Institutional investors were the primary drivers of this trend, increasing their exposure to DEX tokens by sevenfold within two months. Layer-2 (L2) tokens and real-world asset (RWA)-backed tokens also gained traction, with the latter showing increasing relevance as tokenization efforts expand globally.

Conversely, Bitcoin and Ethereum, while still the largest holdings on Bybit, saw a slight reduction in their overall share of non-stablecoin assets. BTC accounted for 31.7% of total assets in August, while ETH’s share increased by 20% quarter-on-quarter, rising from 8.4% in May to 10.1% in August. Together, BTC and ETH’s combined share dropped from 58.8% in May to 55.7% in August, indicating a continued shift toward altcoins.

The growing demand for altcoins is being supported by regulatory developments and infrastructure improvements. In the United States, the recently enacted GENIUS Act provides a regulatory framework for stablecoin issuance, which J.P. Morgan analysts believe could further accelerate market adoption. The firm projects that the stablecoin market could grow to $500–750 billion over the coming years, up from $225 billion as of June 2025. However, this growth is expected to be gradual as the ecosystem matures and liquidity infrastructure expands.