Bitcoin: Institutional Support Remains Strong

Periods of negative sentiment are a well-documented feature of the Bitcoin market cycle. Just as excessive optimism often marks cyclical peaks, sustained caution and scepticism frequently precede renewed growth. As outlined in last month's post, current sentiment around Bitcoin remains subdued, shaped by macroeconomic uncertainty and ongoing selling pressure. However, a closer examination of market structure and institutional activity suggests that the underlying picture is far more positive.

From the continued expansion of spot Bitcoin ETFs and steady institutional allocation, to recent regulatory shifts that broaden access to digital asset services, there is a growing body of evidence that implies the long-term health of a maturing industry. These structural signals offer a more reliable barometer of long-term outlook than short-term sentiment alone.

Sentiment: The contrarian indicator

When crypto market sentiment hits rock bottom, often characterised by extreme fear or prolonged negative funding rates, it often marks a turning point. Historically, these lows reflect exhaustion of seller pressure, where panic selling peaks and buyers start to see value.

For the current period, we've just witnessed a rebound in sentiment as volatility begins to subside, with the Fear and Greed Index hitting a local low of 10 ('Extreme Fear') on February 27th and recovering to a local high of 49 ('Neutral') on March 20th.

As seen in the chart below, the last time sentiment hit 10 mid-cycle was July 21, 2021, which exactly marked the end of that mid-cycle correction. From there, Bitcoin went on to rise another 133% to the final cycle top on November 10, 2021.

Source: McKayResearch

While it's unlikely that current market movements will be a perfect match, we can see from historic data that sentiment indicator lows often portend trend reversals and serves as a strong indicator of a shift in market direction.

Institutional interest remains strong

Despite the cautious mood, institutional investors continue to approach Bitcoin with a clear sense of long-term purpose and growing conviction.

The Coinbase Institutional Survey from 2025 reveals a telling contrast to the retail mood. The report, which polled 352 institutional investors managing nearly $3 trillion in assets, found that digital asset allocations are on the rise: 83% of respondents plan to increase their crypto allocations in 2025, reflecting strong confidence in digital assets.

Coinbase Institutional

But beyond this headline data point, several other data points are highly instructive as to which way the wind is blowing regarding institutional adoption:

• Portfolio allocation: 59% intend to allocate more than 5% of their assets under management to crypto, indicating a shift from a niche to a core investment category.

• Stablecoin Adoption: 84% are using or considering stablecoins for purposes beyond transactions, highlighting their growing utility.

• Altcoin interest: While Bitcoin and Ethereum dominate, 73% hold at least one alternative cryptocurrency (e.g. XRP, Solana), and 68% are interested in exchange-traded products (ETPs) for single-asset exposure.

• DeFi: The number of investors expected to engage with DeFi to rise from 24% to 75% over the next two years (see chart below), which points to rebounding confidence in a niche still impacted by 2022's structural failures.

• Challenges: Regulatory uncertainty (52%), volatility (47%), and custody security (33%) remain top concerns, though 68% believe clearer regulations will drive further adoption.

A key takeaway from the above data points is that not only are institutionals increasing allocations, but rising altcoin exposure and DeFi engagement indicate a growing trend of investors thinking beyond Bitcoin for digital asset exposure. It's also noteworthy that regulatory concerns persist, even in spite of recent favorable developments.

BlackRock’s IBIT moves into Europe

Nothing signals institutional confidence quite like expansion, and BlackRock’s decision to launch its IBIT Bitcoin ETF in Europe is a prime example.

Following the fund’s record-breaking $53.7 billion of inflows in its first 12 months of trading in the US, Blackrock, quietly announced the launch of its European spot Bitcoin ETP under the iShares banner on March 25.

Source: TrackInsight, The Block

Front and centre of the announcement of course is the eye-catching 0.15% fee (until year-end), the Coinbase custody, and of course whether Blackrock can replicate its US success in Europe. But there's more to this announcement.

First, Zurich wasn't picked at random. Switzerland has already emerged as a crypto infrastructure hub. Being located there could position BlackRock to influence European crypto policy from a jurisdiction that’s already ahead of the EU’s Markets in Crypto-Assets (MiCA) framework.

Second, European Bitcoin ETP issuers have been engaged in a fee war directly as a result of the significantly lower total expense ratios (TERs) of the US-based ETFs, with CoinShares, WisdomTree, and Invesco all slashing their TERs by 10-15 basis points. Blackrock's entry at 0.15% will exacerbate this given that it undercuts the lowest available fee (currently 0.21% for the 21Shares Bitcoin Core ETP) by a further 6 basis points. It will be interesting to see if Blackrock can lure away investors with existing positions in European ETPs given they will raise to 0.25% at year-end when the temporary fee waiver ends.

Finally, BlackRock’s entry will bring a certain credibility but we cannot expect European retail or institutional investors to pile in as was witnessed in the US simply because the European market for Bitcoin and Crypto ETPs is already highly developed and more mature than the US market. It will also be interesting to observe how this impacts the European Crypto ETP market, particularly as the European Securities and Markets Authority (ESMA) is currently reviewing the rules on UCITS-eligible assets.

Regulatory Shift: FDIC clears the way for banks

One development that's flown under the radar is the FDIC’s recent policy reversal, which now allows banks to engage in crypto-related activities without seeking prior approval. With the rescinding of the 2022 rule, FDIC-supervised institutions can offer digital asset services provided they practice 'appropriate risk management.'

This move removes a major barrier that had long slowed crypto adoption in the traditional banking sector, and, along with the ending of SAB121, means regulated banks now have more room to offer Bitcoin custody, trading, and related services which will enable a new layer of access and trust for both retail and institutional clients.

While this doesn’t mean banks will rush into crypto services overnight, it does mark an important change in attitude. Instead of obstructing progress, both the FDIC and the SEC appear to be moving towards a more integrated, oversight-driven strategy; a far cry from the punitive, innovation-stifling approach of the past four years.

Conclusion: A healthy market with headwinds ahead

Of course, it would be naive to suggest that the road ahead is without obstacles. Macro conditions remain uncertain, and some analysts estimate a 40% chance of a US recession in 2025, driven by persistent inflation, higher for longer interest rates, and geopolitical instability.

However, recession risk is not inherently bearish for Bitcoin. In fact, Bitcoin’s narrative as a store of value or hedge asset could strengthen in such an environment, particularly if monetary policy begins to ease again (global M2 is indeed on the rise).

What matters more is the underlying trajectory of adoption. And here, the signs are clear: institutional capital is flowing in, infrastructure is expanding, and regulation is beginning to mature. These are not signals of a frothy, over-hyped market but indicators of a foundational phase of growth that's occurring in the shadow of public doubt.

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