Institutional Investors Intensify Crypto Engagement – But a 2026 Downturn May Be Ahead: Insights from Sygnum

Institutional interest in cryptocurrencies is soaring, with many investors looking to increase their digital asset investments. However, forecasts for 2026 suggest a potential downturn as liquidity tightens and macroeconomic conditions shift. This article explores recent findings from Sygnum's Future Finance 2025 report, highlighting institutional attitudes towards crypto and the implications of evolving market dynamics.

Key Takeaways

Growing Institutional Interest: 61% of institutions surveyed plan to increase their crypto investments by the end of the year.
Shift in Strategy: There is a transition from speculative trading to strategic financial participation.
Future Concerns: Expectations for 2026 indicate potential market cooling due to liquidity issues and changing economic conditions.
Bitcoin Holdings Concentration: A rise in Bitcoin owned by large institutions is affecting the market.
Interest in Tokenization: Institutional interest in tokenized assets is gaining momentum.
ETF Expansion: There is a demand for broader ETF access, particularly those with staking rewards.

Institutional Investors Are Piling into Crypto — But a 2026 Downturn Is Looming: Sygnum

Institutional Investors Embrace Crypto; 2026 Downturn Possible

Institutional investors are dramatically increasing their investments in digital assets this year, according to a report from Swiss crypto bank Sygnum. The report indicates that despite a significant market correction in October, which saw a loss of nearly $20 billion in market value, 61% of the surveyed institutions intend to expand their cryptocurrency holdings by the year's end, with 38% expected to do so in just the fourth quarter.

Confidence Growth Amid Market Correction

Sygnum's research reflects a developing confidence in cryptocurrencies as a long-term portfolio asset. Lucas Schweiger, the report's author, noted that this shift represents moving away from speculative trading towards a more strategic approach to diversifying financial investments. The survey involved over 1,000 professional and high-net-worth investors from 43 countries.

Although the immediate outlook appears optimistic, Sygnum cautions that a pullback may occur in 2026 due to slowing liquidity and diminishing macroeconomic tailwinds.

Market Analysis

Potential Shifts in the Market

According to Schweiger, while 2025 suggests cautious optimism, marked by considerable risk and demand, institutions are adjusting their expectations with regulatory decisions pending. He noted that approximately 55% of institutions remain short-term optimistic, anticipating further price increases driven by ETF approvals and clearer regulations. However, sentiment is expected to transition from bullish to neutral or bearish as we approach mid-2026, largely as interest rates plateau and regulatory advancements stagnate.

A significant factor in this outlook is the growing concentration of Bitcoin ownership among large institutions and regulated funds. Analysis from CryptoNews, utilizing data from CryptoQuant and Dune Data, reveals that large entities have increasingly absorbed Bitcoin supply following ETF approvals in January 2024, while retail investors reduced their holdings significantly.

Bitcoin Holdings Distribution

Rising Interest in Tokenization

Sygnum also highlights a notable increase in institutional interest in tokenized real-world assets, which climbed from 6% to 26% year-over-year. The bank views tokenization as an avenue for conservative investors seeking regulated exposure to on-chain opportunities.

The demand for broader access to crypto ETFs—beyond just Bitcoin and Ether—is expanding, with over 80% of respondents expressing interest. Furthermore, 70% suggested they would boost allocations if staking rewards were offered, emphasizing the potential for institutional inflows driven by staking-enabled ETFs once regulatory frameworks permit.

Policy Delays Impacting Market Momentum

However, recent delays in critical U.S. policy developments, including the Market Structure bill and altcoin ETF approvals, have created a cloud of uncertainty. Currently, the ongoing U.S. government shutdown has put at least 16 pending crypto ETF applications on hold, which could dampen short-term momentum in the market.

Despite these challenges, institutional sentiment remains strong. A recent Coinbase survey revealed that 67% of large investors remain optimistic about Bitcoin as we look toward 2026, even as some acknowledge that the market may be entering the latter stages of its bullish cycle. Analysts point to macroeconomic factors, like impending Federal Reserve rate cuts and anticipated fiscal stimulus in China, as elements that could sustain market strength into 2025.

Nevertheless, experts warn that as liquidity begins to tighten and long-term holders start realizing profits, market growth may slow by mid-2026. Sygnum's report encapsulates 2025 as a year marked by "powerful demand catalysts," constrained by regulatory scrutiny. The expectation is that institutional engagement will deepen through ETF integration and diversification, but the next phase of the market may indeed test investor discipline against exuberance.