Since the fourth quarter of 2020, institutions have been at the forefront of the cryptocurrency bull market, but now retail investors have also been at the center stage. Bitcoin (Bitcoin) Is becoming more and more popular all over the world and has officially become El Salvador legal tender On September 7, this made it a landmark event for retail and sovereign adoption of the asset.
However, as the country celebrates “Bitcoin Day”, this is a chaotic event for the premier cryptocurrency token. Soon after the beginning of the day, the price of BTC suffered a flash crash of more than $8,000 and fell to the bottom of $42,900. Although this flash crash coincided with this major token adoption event, its significance to retail consumers and investors far exceeded the short-term price impact of token prices.
Fidelity Investment Director Jurrien Timmer called interesting developments after this adoption Asset maturity Similar to gold in the sixties.In Latin American countries, global food and beverage brands such as McDonald’s, Starbucks and Pizza Hut are now Start accepting Bitcoin as a payment method For their products. The large-scale adoption of such brands is bound to push the overall retail interest in Bitcoin and cryptocurrencies to new heights, because it is becoming increasingly clear that digital currencies have real use cases.
Charles Hoskinson, the founder of Cardano and the co-founder of Ethereum, even predicts that eventually there will be more countries Following the adoption of El Salvador. Along with him is the informer Edward Snowden (Edward Snowden) commend The move on Twitter mentioned that competing countries are now under pressure to acquire Bitcoin, “even if it is only used as a reserve asset.” Even if the world’s major economies begin to consider the adoption of BTC as legal tender, it will greatly promote retail use.
The adoption of Bitcoin in El Salvador has always been an important part of the mainstream cryptocurrency hype and narrative in the late summer. Especially for retail investors, it often becomes a FOMO (fear of missing out) situation. As BTC continues to rise throughout the year, they often regret not buying tokens a few months ago. This may result in a large inflow of funds from retail traders.
Retail investors pay attention to cryptocurrencies
A survey conducted by the Association of Foreign Exchange Dealers (AFD), the foreign exchange market regulator, tried to gauge investor sentiment towards Russian digital currencies. The survey results show that 77% of 502 people Investors participating in the preferred cryptocurrency Like Bitcoin, Ethereum (Ethereum) And Litecoin (LTC) To traditional financial assets such as gold and foreign exchange.
Cointelegraph discussed this comparison with gold further with Jaime Rogozinski, the founder of WallStreetBets, which is a subreddit group for retail investors. He said, “In the United States, gold is synonymous with store of value, and its holdings of gold are almost three times the sum of the next three countries, but global investors have the opportunity to create a level playing field with the emergence and unlimited potential of BTC .”
Rogozinski also mentioned that with the exception of the United States, all other participants in the global economy are interested in the U.S. dollar and gold, thus losing the financial hegemony currently held by their assets. Comparing the performance of gold and BTC, there is a huge difference in the results. In the short term, BTC has a year-to-date (YTD) increase of 62.76% and an annual increase of 351.62%, while gold has a year-to-date decrease of 5.79% and an annual decrease of 7.91%.
In addition to Russia, even India is also witnessing millennials Shift Their interest in cryptocurrencies during the global COVID-19 pandemic. Nischal Shetty, CEO of Indian cryptocurrency exchange WazirX, told Cointelegraph that institutional participation has paved the way for retail interest in cryptocurrencies on a global scale:
“The pandemic has made an equal or even greater contribution to accelerating crypto adoption, especially in countries such as India. In such uncertain times, cryptocurrencies provide ordinary people with new ways to make money online, whether they are from a city or Countryside.”
According to data provided by WazirX, the exchange has witnessed a 2,648% increase in registered users from second- and third-tier cities in India. In 2021, users in these two sub-cities accounted for 55% of user registration growth, even exceeding 2,375% in first-tier cities. In addition, 70% of users of the platform are under 35 years old.
Perhaps echoing the surge in interest is the U.S.-based cryptocurrency exchange CrossTower announced that they will Expand business to India And “expand to other regions using this country as a hub.”
In a country with a population of 1.36 billion, of which more than 65% of the population is under the age of 35, that is, more than 880 million, the potential for further market growth is huge. Data from blockchain analysis provider Chainalysis shows that Indians’ investment in cryptocurrencies has increased from US$900 million in April 2020 to US$6.6 billion in May 2021, an increase of 600%.
A report from Chainalysis tried rank Using an indicator called the Global Cryptocurrency Adoption Index, countries are classified according to the level of retail adoption. Using this indicator, the report found that Vietnam ranked first, India ranked second, followed by Pakistan, Ukraine and Kenya.
For Vietnam, by carefully studying the country’s transaction volume and the number of users, the adoption of this indicator can be clearly confirmed. According to the data provided by the Binance research team to Cointelegraph, from January to May 2021, the total number of Binance users and transaction volume of all cryptocurrency pairs provided by Vietnam increased by an average of 288.51% and 235.66%, respectively. Compared with this growth, Vietnam’s gold reserves increased by only 3.37% during the same period.
Rogonzinski further expressed his views on how institutional interests affect retail investors. He said: “Institutional investors have the ability to withstand the decline of Bitcoin and pay more attention to long-term gains, but I believe that every bull market will successfully bring more Retail investors are brought into the market and hope to teach them HODL.”
Retail brings numbers, organization brings movement
Industry analysis report of the cooperation between cryptocurrency exchange OKEx and on-chain data provider Catallact disclose Despite the growth of small BTC addresses (holding less than 10 BTC), retail investors contributed relatively little to the overall trading pool in the first quarter of 2021.
The data provided by Binance Research to Cointelegraph shows that, from the perspective of BTC trading volume alone, the rebound in BTC prices and interest rates may be due to the combination of retail investors and institutional investors. From June 2021 to August 2021, the number of retail and institutional investors in Binance increased by 3.29% and 1.36%, respectively.
Consistent with this figure, the total number of BTC traded by exchange retail and institutional investors increased by 4.61% and 3.99%, respectively. During the same period, the overall BTC transaction volume increased by 1.98%.
This chart shows how the increase or decrease in retail and institutional investors trading BTC on the platform is consistent with the overall BTC trading volume changes. The representative of the Binance research team further stated:
“The shift in investor mentality from traditional assets such as gold or foreign exchange to cryptocurrency is definitely not limited to developing countries. In fact, it is also common in more developed countries. In these countries, the sentiment supporting crypto investment is more regarded. This is to gain exposure to emerging asset classes, not just a store of value or a means of hedge against inflation.”
In discussions with Cointelegraph, Du Jun, the co-founder of Huobi Global Cryptocurrency Exchange, pointed out that the Bitcoin balance of all exchanges is an indicator of how institutions participate in the market. According to Glassnode data, the number of bitcoins held in exchange wallets bottomed out to 2.48 million this year, further adding: “The bitcoin balance on Coinbase has dropped to approximately 700,000, the lowest level recorded in the past year. In the past month, there was a net outflow of Bitcoin from mainstream exchanges.”
Since most institutions use Coinbase for investment, Jun infers that institutions have purchased more BTC in the past month.He also mentioned large banking institutions such as Rothschild and Morgan Stanley Increased exposure to crypto assets Through their holdings in Grayscale Bitcoin Trust (GBTC).
Institutions that invest in Bitcoin or enter digital currency as a payment mechanism are still in their infancy. Therefore, under the leadership of institutional investors, the untapped potential of cryptocurrency proliferation to retail investors has been well served because it gives retail investors a sense of security and the upside potential captured by the hype in the cryptocurrency market .