Why Retail Players In Crypto Continue to Be Hesitant Despite Strong Institutional Backing?

Institutional players are back in the crypto space over the last few weeks. However, retail support in the crypto market is still lacking as a majority of retail investors remain hesitant over fresh participation at this point.

After a brutal second quarter, Bitcoin, Ethereum, and several other cryptocurrencies rallied significantly over the last 45 days. While BTC has given a healthy 25% rally, digital assets like ETH and others have shot up anywhere between 80-100% in a short span.

The institutional push for crypto has partly played a game in the recent price rally. Over the last month, we witnessed some key developments like BlackRock partnering with crypto exchange Coinbase to offer its institutional clients exposure to Bitcoin and crypto. Hedge fund giant Brevan Howard also raised more than $1 billion for a new crypto fund. In its recent note, BlockFi noted:

Bitcoin’s rally “may be attributed to the recent optimistic headlines on continued institutional adoption of crypto”. Bitcoin’s rally “may be attributed to the recent optimistic headlines on continued institutional adoption of crypto”.

BlackRock is the world’s largest asset manager with more than $10 trillion in assets under management (AUM). The participation from BlackRock clearly shows that institutional demand for crypto remains upbeat.

Retail Participation Lacks In Crypto

While the crypto market has bounced back over the last 45 days, retail participation in crypto is still lacking at this point. It seems like retail players still have the wounds of the market crash during the first half of 2022.

During its second-quarter earnings report last week, Coinbase said that its core retail customers have been less active during the recent price rally. Speaking to Bloomberg, Marc Chandler, chief market strategist at Bannockburn Global Forex, said:

“That’s part of the issue — for it to succeed or to succeed further, I think it’s got to have more of a networking effect. It’s got to have more people participate in it.”

Bitcoin small addresses, with less than one BTC, have been on the surge. As per Glassnode,  “This suggests that retail is participating, just not yet in the kind of size that would add more momentum to the overall market”.

On the other hand, global macroeconomic conditions still don’t look favorable as of now. Although the inflation data is on a decline, it is still quite high for the Fed to initiate interest rate hikes going ahead.