Even if you're only looking to invest $2,500 or so, there are now a couple of new reasons to buy and hold high-quality coins, especially XRP (XRP 0.91%) and Solana (SOL 3.55%).
There's some fresh information that pertains to what the market's biggest players are thinking about doing in the next couple of years or so. The big fish may or may not be smarter than you are, but it pays to watch them simply because of their size. So, let's examine how their plans make it more likely for Solana and XRP to be good buys.
CRYPTO: XRP
Key Data Points
Don't ignore these new signs
In the middle of January, Coinbase Global surveyed 352 institutional investors in the U.S. and EU with the goal of evaluating their approach to digital assets like cryptocurrencies. More than half managed between $1 billion and $50 billion in assets, so as a grouping, the average respondent controls quite a bit of money. In other words, when these people make a decision to buy something, it often moves the price of the asset.
Of the investors in the survey, 73% held digital assets other than Bitcoin and Ethereum, with 34% holding XRP and 30% holding Solana, making them the most popular pair of altcoin assets held. That's a new reason to buy those coins, as it's a confirmation that they have traction with the investors that have the largest sums of capital, and it additionally confirms that further adoption by that same group is likely, which will drive prices higher. Here's why.
Of those surveyed, 51% do not currently interact with any decentralized finance (DeFi) protocols, but they plan to in the next two years, which is the second reason to buy XRP and Solana. As the capital under institutional control flows into the DeFi segment, the funds will prefer places where transactions are cheap and fast, which is a set of criteria that readily applies to both of those chains. Furthermore, investors will preferentially buy into DeFi projects on chains where they already have capital.
It's very likely that XRP and Solana won't be the only coins that benefit from institutional investors loading up on DeFi coins or tokens. Still, the fact that major buyers are planning to allocate more of their capital means that there's going to be more upward pressure on prices in the ecosystems that have the most DeFi presence and the highest ease of use. Beyond Solana and XRP, neither of those factors is as well-represented elsewhere in crypto; Ethereum is expensive and slow to use, and other altcoins have vastly smaller market caps, so their DeFi ecosystems are also much smaller.
CRYPTO: SOL
Key Data Points
Understand how your situation may differ from those in the survey
As always, you don't need to jump and invest your $2,500 into either XRP or Solana merely on the basis of institutional interest and the high likelihood of that interest escalating. Your portfolio's needs are almost certainly very different from those of institutional portfolios, and your time horizon for investments could be much shorter or much longer.
To be sure, following the biggest movers of capital is not a bad choice here. Institutional capital is rarely fickle, which means that once it's allocated, it can stay put for years and years. That supports the case for holding these two coins for the long term.
Finally, be aware that these investments may be getting somewhat less risky than they were before due to the inflows of institutional capital -- but that does not make them risk-free or even safe. Nor is the inherent volatility of these coins going to be extinguished by steadier hands buying in, at least not immediately. So, if you're the type that gets nervous seeing your portfolio swing around from week to week, do yourself a favor and keep your total allocation to Solana and XRP fairly small, at least at the start.
Once you've built a bit more confidence in their staying power despite their volatility, it will be easier to invest a bit more and hold onto your coins without as much anxiety.
