While institutions have been the mainstay of the crypto bull market since Q4 2020 and beyond, retail investors are now taking center stage. Bitcoin (BTC), which is gaining popularity all over the globe, became legal tender in El Salvador on September 7, making it an important event for both retail adoption and sovereign adoption.
It was a chaotic day for the nations premier cryptocurrency token, as it celebrated “Bitcoin Day.” BTCs price plummeted to $42,900 shortly after the day started. Despite the fact that the flash crash occurred at the same time as the major adoption event of the token, the impact it had on investors and retail consumers far outweighs any short-term price impact.
Jurrien Timmer, Fidelity Investment director, described this adoption as a coming-of-age for the asset that is similar to the sixties gold. Global food and beverage companies like McDonalds and Starbucks have begun accepting Bitcoin payments for their products in Latin America. These brands are likely to increase retail interest in Bitcoin and other cryptocurrencies. It is now becoming clear that there are many real uses for digital currencies.
Charles Hoskinson (founder of Cardano, and co-founder at Ethereum), predicted that more countries would follow El Salvadors lead. Edward Snowden, a whistleblower, also applauded the move on Twitter. He mentioned that there is pressure on other nations to acquire Bitcoin, even if its only as a reserve currency. However, this will provide a tremendous boost to retail use.
The mainstream narrative surrounding cryptocurrency has focused heavily on El Salvadors adoption of Bitcoin. Retail investors are often affected by FOMO (fear-of-missing out), which can lead to a situation where they regret not purchasing the token months ago. Retail traders could see a large influx of funds as a result.
Crypto is a hot topic for retail investors.
The Association of Forex Dealers (AFD), an organization that regulates the foreign exchange market, conducted a survey to gauge investor sentiment about digital currencies in Russia. According to the survey results, 77% of 502 participants preferred cryptocurrencies such as Bitcoin, Ethereum (ETH), and Litecoin(LTC) over traditional financial assets such as gold and forex.
Cointelegraph spoke with Jaime Rogozinski (founder of WallStreetBets), about this comparison to gold. This subreddit is for retail investors. He stated that “gold is synonymous” with the U.S. store of value, which has nearly three times the amount of gold as the next three combined. However, global investors have the chance to level the playing fields with BTCs emergence, boundless potential, and their ability to invest in it.
Rogozinski stated that all other participants in the global economic system, except the U.S. Dollar, have an interest the U.S. Dollar losing its financial hegemony. The results of BTC and gold are vastly different. BTC has experienced 62.76% year-to-date gains (YTD), and 351.62% annual gains. Gold has suffered 5.79% losses and 7.91% annual losses.
India, along with Russia, is seeing millennials shift their interest in cryptocurrency during the global COVID-19 epidemic. WazirX CEO Nischal Shetty told Cointelegraph that institutional participation has opened the door for retail interest in cryptocurrency.
“The pandemic made an equal or greater contribution to crypto adoption, particularly in India.” Crypto has given people new ways to make money online in these uncertain times.
WazirX data shows that the exchange saw a 2,648% rise in signups from Tier-II cities and Tier-III in India. These two cities account for 55% of the increase in user signups in 2021. This is even more than the growth of Tier-I cities which saw a 2,375% rise. 70% of users on the platform are under 35 years old.
CrossTower, a U.S.-based cryptocurrency exchange, announced that they would expand their operations to India and use the country “a hub for expanding into other geographies.”
The potential for the markets growth is enormous in a country with 1.36 billion inhabitants and more than 65% under 35. Chainalysis, a blockchain analytics provider, showed that Indians had invested 600% more in cryptocurrency than they did in April 2020. This was $6.6 billion in May 2021.
Related: September is dreadful The slump trend could be broken by Bitcoins price
Chainalysis report attempted to rank countries based on their retail adoption rate using a method called the Global Crypto Adoption Index. This metric was used to rank Vietnam, India, and Pakistan as the top two countries. Kenya, Ukraine, and Ukraine were close behind.
Vietnams adoption of this metric in tandem is confirmed by a closer examination of trading volumes and users. The Binance Research team provided data to Cointelegraph. They found that the average number of Binance users in Vietnam and the trading volumes for all cryptocurrency pairs have increased by an average 288.51% and 235.66% respectively between Jan and May 2021. This growth is comparable to the 3.37% increase in Vietnams gold reserves over the same time period.
Rogonzinski also commented on the impact of institutional interest on retail investors. He stated, “Institutional investors are able to weather Bitcoins drops and have a greater eye toward long-term gain, but I believe that each bull run succeeds at bringing in more retail investors and hopefully teaching them how to HODL.”
Institutions bring movement, while retail brings in numbers
A report by OKEx, a cryptocurrency exchange, and Catallact, an on-chain data provider Catallact showed that retail investors contributed a smaller percentage to the total transaction pool in Q1 2021 despite growing small BTC addresses (which are less than 10 BTC).
Binance Research data shows that the rise in BTC price and interest rates could be due to a combination of institutional and retail investors. Binance saw a 3.29% increase in institutional investors and a 1.36% rise in retail investors between June 2021-2021.
This number is consistent with the increase in the number of BTC traded on the exchange by institutional and retail investors. The overall volume of BTC traded grew by 1.98% during the same time.
This chart shows how the movement in BTC volume is affected by the movements of institutional and retail investors trading BTC on the platform. Binances research team representative further stated:
This shift in investor mindset away from traditional assets such as gold and forex to crypto is not limited to developing countries. It is even more common in developed countries, where crypto investments are seen as more of a way to get exposure to emerging asset classes, rather than a store of value or hedge from inflation.
Cointelegraph was contacted by Du Jun, the co-founder of Huobi Global cryptocurrency trading exchange. He suggested that the Bitcoin balance on all exchanges be used as a measure to assess institutional involvement in the market. Glassnode data shows that the total amount of Bitcoin in exchange wallets reached 2.48 million. Further, Coinbase balances dropped to 700,000, which is the lowest recorded level throughout the year. In the last month, major exchanges saw net Bitcoin outflows.
Jun inferred from Coinbases use that more institutions have bought BTC in the last month, as most institutions use Coinbase for investing. He mentioned that Morgan Stanley and Rothschild, large banks, have increased their exposure for crypto assets via their holdings in Grayscale Bitcoin Trust (GBTC).
The earliest stages of institutional investors in Bitcoin and digital currencies as payment mechanisms are still in their infancy. Institutional investors are the best to lead the way in bringing cryptocurrencies to retail investors. This gives them a sense security and the upside potential of crypto markets.