Source: Cointelegraph Original: "{title}"
Views from: Hatu Sheikh, Founder of Coin Terminal
Cryptocurrency began with Bitcoin (BTC) — a representation of decentralization — promising open access and fair distribution of financial resources. Over time, it has evolved into a vastly different realm where lucrative market opportunities are often out of reach for retail investors.
Wealthy individuals, high-net-worth family offices, corporate insiders, and venture capitalists have been able to access premium crypto trading opportunities ahead of time. Retail investors find themselves in a bind, as their late entry leads to higher market risks and limited profit margins.
However, the situation is changing, primarily due to the rise of Real World Asset (RWA) tokenization and a decisive rejection of venture capital-backed tokens. Cryptocurrency is no longer an exclusive asset class for institutional investors — retail users are now actively shaping the future of finance.
The gap between retail and institutional investors in cryptocurrency exists.
Retail investors have long stayed away from the crypto market. Analyzing the activity of retail wallets holding less than 0.1 BTC can attest to this.
According to Glassnode, the retail spending of Bitcoin from wallets holding less than 0.1 BTC has decreased by 48% since November 2024. A crypto commentator confirmed this data, showing that retail interest has dropped to a three-year low.
Institutional investors like Metaplanet, Strategy, and Intesa Sanpaolo have recently increased their Bitcoin holdings, seizing the opportunity to acquire during the price drop. Meanwhile, large Bitcoin holders or crypto whales accumulated over 39,620 BTC in a single day, worth $3.79 billion.
Matt Hougan, Chief Investment Officer of Bitwise, stated, “There is currently a huge disconnect in sentiment between retail and professional investors in the cryptocurrency market.” Data indicates that retail sentiment is bearish, while professional investors remain bullish, creating almost two parallel worlds.
As corporate adoption of Bitcoin reserves increases and demand for Bitcoin futures rises among institutions, the proportion of retail investors is continuously shrinking. The Chicago Mercantile Exchange (CME) controls 85% of the monthly futures market, while crypto exchanges dominate the retail-driven perpetual contracts.
CME's monthly Bitcoin futures open interest provides hedge funds and investment banks with Bitcoin exposure and liquidity access. However, this also indicates that the influence of retail investors in Bitcoin price discovery is gradually diminishing.
Market structures limit retail investors' access to capital reserves, depriving them of early opportunities in financial markets. The psychological phenomenon of "unit bias" exacerbates this issue, as retail investors cannot own a complete unit of an asset like Bitcoin.
When governments consider forming strategic Bitcoin reserves, they may face the risk of being locked into central bank cold wallets. To optimize utilization, it is necessary to allow retail investors access to Bitcoin through open reserves.
Despite the limited market opportunities, the crypto industry is providing democratized market access for retail investors through innovations like asset tokenization and meme coins.
Retail investors are reclaiming the crypto market.
Sometimes, the best way to achieve financial inclusion is to remove complexity, making investing fun and easy to understand. Meme coins have successfully done this, using speculation as a tool to make a statement against low liquidity, high fully diluted valuation tokens backed by venture capital. This is also why retail investors are buying meme coins in large quantities.
Despite the extreme market volatility of meme coins, they still dominate the retail speculation market. Nansen's research analyst Nicolai Søndergaard believes that the season for altcoins has not yet arrived, as meme coins have captured investors' minds and capital allocation.
The meme coin phenomenon showcases how ordinary people can transform viral spread and imitation desire into profitable power through community-driven wealth creation. More importantly, it demonstrates retail investors' rejection of venture capital-driven token speculation, which deprives them of fair participation in high-value token offerings.
Meme coins also provide token holders with a sense of belonging, fostering a sense of shared values and culture. Therefore, when former President Donald Trump launched his meme coin, 42% of investors were first-time buyers, highlighting the potential of meme coins to attract retail investors.
In addition to speculative meme coin trading, retail investors are also adopting tokenized real-world assets to hedge against uncertain market conditions. The RWA tokenization market recently surpassed $17 billion, enhancing retail investors' accessibility and market opportunities through increased liquidity and fractional ownership.
Retail and small investors can now participate in tokenized capital markets that were previously limited to institutions and wealthy individuals. Thus, tokenization is a democratizing and inclusive market strategy that helps new investors access the financial system while avoiding liquidity challenges.
Mastercard recently released a white paper explaining how RWA tokenization can bring significant socio-economic benefits to people in emerging economies like Latin America. In developing economies, tokenization addresses the trust deficit issue by enabling transparent ownership tracking for seamless asset transfers.
Asset tokenization helps retail investors participate in the DeFi market by improving capital efficiency. A report from PwC shows that tokenization benefits both buyers and sellers in the $1.5 trillion private credit market by splitting loans and lending.
In turbulent market conditions, institutional investors with rich capital reserves can continue to accumulate Bitcoin and other altcoins. However, retail investors with limited capital supply must seek asset classes with the lowest entry barriers.
As the crypto industry offers diversified investment options and innovative products, retail investors now have the freedom to invest in their preferred assets. Retail investors have finally arrived at the moment to enter the chain.
Views from: Hatu Sheikh, Founder of Coin Terminal
Related: Regardless of U.S. participation, the proliferation of cryptocurrency will be driven by high-growth markets
This article is for general informational purposes only and is not legal or investment advice. The views, thoughts, and opinions expressed in this article are solely those of the author and do not necessarily reflect or represent the views or positions of Cointelegraph.
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