For investment institutions, diversification is a critical component of a risk management strategy. Putting too much money into a single type of asset or a set of related asset classes risks the entire portfolio losing value at once. As a result, many investors will use a combination of stocks and bonds to reduce their risk exposure since these types of assets generally don’t track each other’s rises and falls.

With the introduction of digital assets, investors have another option for further diversifying their asset base and reducing risk exposure. Historically, Bitcoin and other cryptocurrencies have demonstrated limited correlation with the USD and other fiat currencies since their values are derived from the market rather than depending on backing from fiat assets. When combined with other forms of digital assets, they represent another wide range of potential investments.

A 2025 survey by State Street explored investment institutions’ current exposure to digital assets and their future plans. Their research found that digital assets are already widely accepted as a form of investment and that their role is likely to only expand in the near future. Read on for a summary of the survey’s key findings. 

Digital assets can come in a variety of different forms. Some are self-contained stores of value, while others represent fiat currencies or physical assets. According to the State Street study, the most common digital assets for investment companies to hold include:

• Tokenized Assets: Tokenization of real-world assets (RWAs) and traditional financial instruments allows ownership of these assets to be tracked and transferred on-chain. Tokenized private and public assets were the first and third most common digital assets held, accounting for 2.5% and 2.2% of overall holdings, respectively.

  
  

• Digital Cash: Digital cash includes digital representations of fiat currencies, and stablecoins are included within this category. Approximately 2.3% of overall holdings are made up of digital cash.

  
  

• Bitcoin and Ethereum: Bitcoin and Ethereum are the two most significant cryptocurrencies by market cap and pioneered the concepts of blockchain and smart contract platforms, respectively. Each of them accounted for 2.2% of overall holdings, as did public tokenized assets.

  
  

• Other Crypto Assets: In addition to Bitcoin and Ethereum, investors may hold altcoins, memecoins, non-fungible tokens (NFTs), and other crypto assets. Altogether, these made up approximately 2.1% of total investments.

  
  

• Other Liquid Cryptocurrencies and Tokens: Finally, investment institutions held approximately 2% of their overall holdings in other types of liquid cryptocurrencies and tokens.

While digital assets have become a common component of investment holdings, accounting for over 20% of total holdings, different organizations and individuals have varying levels of acceptance of the new assets. One of the most significant differences is between the investment habits of asset managers versus owners.

In general, asset managers are significantly more likely to invest in digital assets than owners. For example, asset managers are 6x more likely to be holding tokenized public assets than owners. While percentages varied, these imbalances applied to many of the varying types of digital assets.

This implies that asset managers, who have more day-to-day experience with digital assets and their advantages, see the benefits that they provide. When working with their own portfolios, this translates to greater exposure to digital assets than for asset owners.

In addition to asking about investment institutions’ existing exposure to digital assets, State Street also looked into future plans. In general, asset managers and owners indicated that they planned to increase their exposure to digital assets.

Within the next year, 50% of responders plan to increase their exposure to digital assets, while another 33% plan to keep their existing allocations. Within the next five years, 69% planned increases, while 14% planned no changes. This means that only 17% of respondents to the survey felt like they had too much exposure to crypto, compared to 83% with a positive view.

Digital assets gain their value from various sources. For example, stablecoins and many types of tokenized assets provide returns based on the performance of the US dollar or the other fiat assets that back them. In contrast, cryptocurrencies like Bitcoin and Ether are priced based on the value that they provide to users and supply and demand in the marketplace.

For this reason, traditional cryptocurrencies like Bitcoin and Ether experience greater volatility and offer more potential ROI than stablecoins and many other digital assets. Over a quarter of survey respondents (27%) said that they gained most of their returns from Bitcoin, and another 21% pointed to Ether as the top earner. As a result, only two of the five digital asset classes accounted for 48% of earnings, and, when altcoins are added in, cryptocurrencies in general likely provided the majority of all returns.

Digital assets represent a valuable opportunity for investors. The ability to diversify risk by placing some money in a new asset class reduces the risk that market movements will wipe out an entire portfolio. With multiple types of digital assets available, investors can also optimize their portfolio to maximize potential rewards or manage exposure to various risks.

The advantages that digital assets provide — and the level of interest also demonstrated by investment institutions — are a major opportunity for DeFi projects. With planned investment in digital assets on the rise, efforts to tokenize various assets have a growing target market.

However, investors and builders alike also need to consider the risks associated with these investments. Hacks are common in the DeFi space, and protocols need to implement security best practices to manage the threat of smart contract hacks, compromised private keys, business logic flaws, and other common causes of these incidents.

Halborn offers a range of advisory services designed to support efforts to enhance project security or perform due diligence on potential vendors and solution providers. To learn more about how Halborn can help your project, get in touch.