Harvard University endowment’s decision to trim its bitcoin BTC$67,035.11 holdings while adding exposure to ether (ETH) has raised a familiar question: Is the endowment making a bet on Ethereum over Bitcoin, or simply adjusting risk?

The answer may be less dramatic than it appears and potentially bullish for the sector.

Michael Markov, co-founder and chairman of Markov Processes International, who studies university endowments, said crypto is likely the most volatile part of Harvard’s public markets portfolio. In the fourth quarter of 2025, price swings in both bitcoin and ether surged, with both assets losing around 25% of their value.

These sharp price swings have, at least in part, led Harvard to rebalance its portfolio, even if it did not change its long-term view of bitcoin. When an asset becomes more volatile and riskier than intended in a portfolio, cutting back restores balance.

“When volatility rises sharply, the risk contribution of that sleeve can expand disproportionately relative to its capital weight,” Markov said. In that setting, he added, trimming exposure can happen “without implying a strategic shift.”

Simply put, Harvard, which bought BlackRock's bitcoin ETFs last year, likely didn't lose its conviction in bitcoin; rather, it moved to rebalance its risk appetite.

In fact, it's not just a crypto-specific move. Rebalancing capital out of assets that have done well and into underperforming sectors is something most Wall Street portfolio managers do to keep returns fixed. The idea is to rebalance the portfolio ahead of a market rotation, moving outperforming assets into underperforming ones to capture an eventual shift in sentiment.

For example, given sky-high valuations of traditional equities, some of these endowments, which tend to focus on long-term return, have begun looking into other alternative investment ideas, including digital assets-related ETFs. Harvard first bought bitcoin in the third quarter of 2025, allocating roughly 20% of its reported U.S.-listed public equity holdings into the crypto asset. The idea is not to overhaul portfolios but to add measured exposure that could lift returns in years when crypto or underperforming assets perform well, and traditional equities start to lose their higher valuations.

Another possibility is liquidity.

Harvard has increased its allocation to private equity in recent years, Markov noted, pushing more capital into long-term, illiquid investments. At the same time, billions of dollars in unfunded commitments remain on the books. That creates pressure on the smaller slice of the portfolio that can be sold quickly.

“That means the liquid sleeve is relatively small compared to the capital call obligations,” he said. When that happens, and investors such as Harvard need to fund capital investment requests from private equity, they tend to sell more liquid, publicly traded assets to fulfill those commitments.

“Selling some public ETFs – including crypto ETFs – is mechanically the easiest way to manage that pressure,” according to Markov.

Crypto demand

Despite the need to rebalance out of volatile assets or to fund other capital commitments, Harvard didn't exit crypto.

Instead, it added almost 3.9 million shares of BlackRock’s ether ETF, currently valued at $56.6 million.

Samir Kerbage, chief investment officer at Hashdex, sees that move as part of a broader institutional shift into digital assets and beyond just investing in bitcoin.

“Harvard’s purchase of Ethereum ETFs is a clear sign of institutional demand for crypto assets beyond bitcoin,” Kerbage said. He pointed to the GENIUS Act — passed into law in July — making it easier for large allocators to navigate the crypto landscape.

As rules around stablecoins and tokenized securities take further shape, investment committees of large institutions may feel more comfortable backing networks that support those applications.

Ethereum sits at the center of much of that activity. Over the past few years, it has become the main network for stablecoins, tokenized funds and other onchain financial applications used by asset managers and fintech firms. Unlike bitcoin, it offers institution-level staking, allowing holders to lock up tokens to help secure the network and earn yield. That feature can make ether look less like a pure directional bet and more like exposure to the underlying infrastructure powering digital financial services.

Kerbage also expects institutions that move beyond bitcoin to favor diversified products, but slowly. While some allocators may consider assets such as ether, XRP or solana (SOL) on their own, he said many will likely choose index-style vehicles instead.

“This ongoing trend is not because it’s the fashionable choice, but because the alternatives are genuinely hard,” Kerbage said, citing questions such as which tokens to hold, how much to allocate and when to rebalance. “These aren’t crypto-specific problems.”

However, for a giant fund like Harvard signaling a desire to expand further into digital assets, even slowly, is likely positive for crypto, as even a few years ago, this was unthinkable.

Taken together, Harvard’s bitcoin trim and ether buy may reflect two things: managing short-term risk and cash needs, while slowly expanding beyond bitcoin as U.S. crypto rules become clearer. Ultimately, it's likely a broader sign of further institutional confidence in digital assets.