Bank of America’s Global Fund Manager Survey shows that institutional interest in cryptocurrency is very low, with average investments close to zero. More than half of global investors have no dedicated investments in cryptocurrencies, even though the market is growing. In a survey from September, 67% of fund managers reported not investing in digital currencies like Bitcoin, Ether, Ripple, and Tether. This indicates that many institutional investors do not view crypto as part of their regular investment strategies. A few survey participants have ventured into the crypto market. Only 3% reported a 2% allocation in crypto, another 3% hold 4%, and just 1% have more than 8% exposure. Overall, the average investment in cryptocurrency is just 0.4%. Among those who do invest, the average allocation is 3.7%. This is a sharp contrast to the higher percentages typically found in equities, bonds, and cash. The survey reveals that 84% of fund managers have not begun long-term investments in crypto. Only 8% have made structural allocations, suggesting that most view crypto as a short-term opportunity rather than a core investment. Despite growing retail adoption and changing regulations, institutional investors remain cautious due to high volatility and regulatory issues. While crypto markets are trading in the trillions, most professional fund managers are still on the sidelines. These findings indicate that institutional money is largely absent from the market, making it sensitive to shifts in sentiment. This large pool of potential investment means that any reason for institutions to enter, like clearer regulations, could lead to significant market reactions. For derivative traders, this scenario suggests preparing for increased volatility in the future. We are now more than a year and a half past the introduction of spot Bitcoin ETFs in early 2024, which have attracted over $70 billion in assets. However, this amount is very small compared to the trillions managed by these institutions, suggesting they are using these ETFs for short-term exposure rather than a fundamental strategy. This hints that the next big market shift will rely on a broader institutional embrace of crypto. Currently, the gap between potential investment and actual amounts creates a fragile market, which is perfect for strategies that focus on volatility. Implied volatility for options set to expire in early 2026 is already high, indicating that the market expects a significant move before that time. It’s wise to consider strategies like long straddles or strangles to make the most of a potential breakout, regardless of which direction it takes. With 84% of managers yet to start structural allocations, the potential for future investment is enormous. A smart strategy is to buy long-dated call options that expire in mid-to-late 2026. This allows for a bet on the eventual “great allocation” while limiting immediate risk to the premium paid. However, in the weeks ahead, the lack of these large buyers means less structural support to handle bad news. Ongoing uncertainty from U.S. regulators is the main reason fund managers cite for their reluctance. Therefore, using put options to protect existing long positions against sudden market drops is a sensible approach.

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