Institutional investors are increasingly diving into digital assets, expanding beyond hedge funds and into endowments, pension funds, and state-managed investment pools. The shift follows a growing regulatory framework and heightened legislative interest in integrating cryptocurrencies into the financial system.
Kalshi traders are watching closely. One of the platform’s most active prediction markets asks: “How high will Bitcoin get this year?” As institutional players increase exposure to crypto, the outcome of this bet could be shaped by shifting market dynamics.
What prediction markets are saying about Bitcoin
- My pick: $160,000 or above.
- If institutional investors were to allocate an additional 2% of their portfolios to Bitcoin, it would equate to a capital influx of approximately $2.56 trillion into the cryptocurrency market, which could theoretically more than double Bitcoin’s market cap.
Institutional money pours in
Hedge funds were early adopters of crypto, but U.S. endowments and foundations are now entering the space, driven by the fear of missing out on potential long-term gains. The trend accelerated after Congress announced a cryptocurrency working group on Feb. 4, following an executive order issued by former President Donald Trump last month, according to Reuters.
A bill proposed in North Carolina in February, the NC Digital Assets Investments Act, could push institutional adoption further. The legislation would authorize the state treasurer to purchase Bitcoin as part of its investment strategy, allocating up to 10% of certain public funds—including the Highway Fund and the Teachers’ and State Employees’ Retirement System—into crypto.
“We don’t have a crystal ball on what cryptocurrencies will become in 10 years,” Chun Lai, chief investment officer of the $4.8 billion Rockefeller Foundation, told the Financial Times. “We don’t want to be left behind when their potential materializes dramatically.”
If institutional investors move just 2%, what happens?
Crypto’s institutional footprint remains relatively small but is growing. A 2023 EY report predicted that most institutions would scale digital asset investments within the next two to three years.
Even in 2023, hedge funds stood out – 36% of surveyed firms allocated over 5% of their portfolios to digital assets. By 2024, exposure among hedge funds trading in traditional markets had jumped to 47%, up from 29% in 2023 and 37% in 2022, according to the Global Crypto Hedge Fund Report, published by PwC and the Alternative Investment Management Association (AIMA).
If institutional investors increase their allocation to Bitcoin by just 2%, the impact could be significant. The world’s 500 largest asset managers collectively oversaw $128 trillion in assets at the end of 2023, according to the Thinking Ahead Institute. A 2% increase in Bitcoin allocations from these managers would translate into an estimated $2.56 trillion influx into the market – a game-changing shift that could send Bitcoin to new highs.
Kalshi’s Bitcoin prediction market reflects this speculation. If institutional investors follow through on their growing interest in crypto, the price of Bitcoin could break record levels, leading to a wave of potentially profitable bets on Kalshi’s platform.
A market unlike any other
Institutional players aren’t the only ones drawing comparisons between the crypto boom and other high-risk, high-reward markets. Elliott Investment Management, a $70 billion hedge fund, likened the current crypto landscape to sports betting, writing in a Jan. 31 letter to clients that it “has never seen a market like this,” according to the Financial Times.
The nature of institutional bets in crypto remains unpredictable, but one thing is certain – Kalshi traders are positioning themselves accordingly as they forecast a 35% chance that Bitcoin’s price will rise above $150,000 before 2026.
