Bitcoin’s recent rally was different for one important reason: individual traders were largely absent.
Data from consumer-focused apps like PayPal and Coinbase, as well as insights from CryptoQuant, show muted activity among small investors.
Retail Investors Are Late Arrivals in Crypto Cycles
Historically, retail investors have been late to the party during Bitcoin’s boom and bust cycles. Market watchers suggest this lack of participation suggests the current rally is still in its early stages. Bitcoin is approaching its previous all-time high above $73,000, but individual interest, as measured by internet search trends and app downloads, remains low, Noelle Acheson wrote in her Crypto is Macro Now newsletter.
“Individual investors in general tend to be ‘late adopters’ motivated by price-related headlines and social interest,” Acheson said. “We’ll know we’re approaching peak hype when individual investors start to ‘pile in.’”
Switching to Memecoins
While individual traders aren’t driving the current Bitcoin rally, they haven’t been completely sidelined. The growing appeal of memecoins has also caught the attention of smaller investors, and the industry is now worth $61 billion. According to the data, retail trading volume for memecoins is set to increase fivefold year-over-year through 2024. This growth can be attributed to new tools like pump.fun, which simplify the process of creating cryptocurrencies and allow new tokens to emerge quickly.
Institutional Dominance in Bitcoin
Institutional investors have been the primary force behind Bitcoin’s current rally, particularly through spot Bitcoin exchange-traded funds (ETFs). These big-money investors have poured about $24 billion into Bitcoin ETFs since their initial launch, accounting for about two-thirds of all inflows. However, this institutional enthusiasm has not spread to most altcoins, which remain heavily influenced by retail investors.
Data from Kaiko, a crypto data tracking firm, shows that smaller investors are facing challenges as large altcoin tokens are unlocked and liquidity is concentrated in fewer tokens. Additionally, Bitcoin’s decoupling from the broader crypto market this cycle has meant that most altcoins have failed to match Bitcoin’s price performance, with a few exceptions including Solana, Dogecoin, BNB, and Tron.
As a result, there has been a significant shift in the altcoin world: memecoins now represent almost a third of the top 50 altcoins by market cap, compared to 7% last year.
*This is not investment advice.