Bitcoin has surged to a record high above $123,000 this week, driven by expectations of pro-crypto policies from Washington. Analysts believe institutional investors, such as pension funds and endowments, are still in the early stages of adding bitcoin to their portfolios, with less than 5% of ETF assets held by long-term investors.

Retail investors currently dominate the crypto markets, but there is a correlation between their purchases of crypto-related stocks and ETFs and the surge in prices. U.S. lawmakers are expected to pass bills, including the Genius Act, which will define rules around stablecoins, a fast-growing segment of the crypto market.

The U.S. House of Representatives has made progress on crypto legislation, with key players like Bank of America and Citigroup working on launching stablecoins. Proposed bills aim to provide regulatory clarity and establish definitions for digital assets, potentially attracting institutions that have previously avoided the sector.

Bitcoin treasury companies, such as Strategy and GameStop, are playing a significant role in boosting demand for bitcoin. These companies are increasing their bitcoin holdings and using it as an alternative to traditional assets like cash and gold. Public companies globally have increased their bitcoin holdings by 120% since July last year.

Global net inflows into crypto exchange-traded products hit $4 billion last week, the highest so far this year. Institutional investors like the State of Wisconsin Investment Board and Abu Dhabi’s Mubadala sovereign wealth fund have publicly disclosed their investments in crypto ETFs. Bitcoin has gained 25% this year, while the crypto sector’s market cap now stands at $3.8 trillion.

Read more at Yahoo Finance: Analysis-Institutional investors warm to crypto but demand still nascent