Core Insights - Institutional adoption of crypto has gained momentum following the U.S. approval of spot Bitcoin ETFs in January 2024, leading to discussions on asset allocation strategies [1] - The debate centers around whether large investors should allocate more than 5% of their assets under management to crypto, with allocations above the pre-2025 standard risk-adjusted threshold of 1-5% seen as a significant win for Bitcoin [1] Group 1: Institutional Behavior - Institutions are increasingly considering allocations above the 5% threshold due to a mix of structural factors such as ETFs, custody solutions, and evolving accounting standards, alongside market sentiment [2] - The competitive fear of missing out (FOMO) is driving this shift, as no Chief Investment Officer (CIO) wants to be left behind by peers [3] Group 2: Diversification and Risk - While crypto assets may show high correlation with equities during downturns, they are still viewed as a means to diversify return streams over the long term, with allocations beyond 5% focusing on capturing uncorrelated sources of long-term alpha [4] - Critics argue that institutions may confuse speculative growth potential with sustainable long-term value, but the current investment landscape includes regulated ETFs and infrastructure developments that support long-term market evolution [5] Group 3: Market Dynamics - The return distributions of crypto assets differ from traditional assets, influenced by factors such as adoption cycles, technological innovation, and monetary dynamics [6] - Institutions are exploring tactical flexibility through yield strategies, lending, and derivatives, indicating a more sophisticated approach to crypto investments [6]