Big banks might not be jumping on the bitcoin bandwagon just yet, but other institutional investors are likely to warm up to cryptocurrencies this year.

"I think there is caution, but it depends on which sort of institutions you're talking about," Michael Casey, senior advisor at the Digital Currency Initiative at MIT Media Lab, told CNBC.

More aggressive institutional investors, such as hedge funds, are likely to find the the volatility associated with cryptocurrencies "inherently attractive," Casey said on the sidelines of the UBS Greater China Conference in Shanghai.

"That's a different story than saying you're going to get invested in a technology and everything else underlying it. There's a play that people have on the volatility," he added.

Big banks, however, are likely to approach the space more cautiously, Casey indicated.

Once a niche asset associated with the dark web, cryptocurrencies such as bitcoin have become increasingly regarded as a mainstream play on the back of growing investor interest.

Last year saw the launch of bitcoin futures by the CME and Cboe, some of the world's most prominent exchanges, which lent greater legitimacy to the cryptocurrency.

Bitcoin rose more than 1,200 percent in 2017.

That increase has led to a corresponding uptick in regulatory concern globally as governments attempt to keep up.

"There's a necessary caution that regulators are taking on: Not wanting to kill the technology, but on the other hand, trying to protect the financial system, protect people from this," Casey said.

"What I worry about is that things get too out of hand, we come through a collapse and people sort of ignore the fact that something very real underneath this is being built," he added, comparing the crypto craze with the dotcom bubble, which Casey said ultimately "fed and built the infrastructure for the big next wave of the internet."