The crypto market is heated up, with many scrambling to take a share of the profits before it is too late. Retail investors are not left behind, either. Like other investors, they have also been enticed by the high profits of the quickly appreciating asset class.
Retail investors are known for powering the 2017 crypto bull run that spiked up the price of BTC (Bitcoin). Even though this time is different, retail investors are making a comeback to the crypto ecosystem. During the 2017 bull run, most retail investors left as soon as they got their profits for fear of volatility. From the look of things, this time, they may be in it for the long haul.
The pandemic highlighted the importance of cryptocurrencies. BTC (Bitcoin), specifically, got into the limelight raising high interest. It is currently popular with many investors who are seeking options to diversify their investments.
Even though the market is generally volatile, most investors have used BTC (Bitcoin) as a haven asset. Digital platforms have helped in boosting their popularity. From Google searches, it is evident that more people are interested in BTC (Bitcoin) more than ever.
With the rise in volatility levels making BTC (Bitcoin) prices spike, more users are finding Bitcoin tempting. 2021 has specifically been a year of significant growth. eToro, a crypto trading platform, reported getting 200,000 new users in the first week of January. The company also indicated that it got 61% unique BTC (Bitcoin) users. Also, a 49% unique ETH (Ether) users compared to the previous year. Cryptocurrency trading volumes have also been higher than ever reported. eToro experienced ten times more trading volume.
The growth in numbers is not only on eToro but also on other platforms as well. Coinbase and Kraken experienced a surge of crypto trading interest from their new users. On the other hand, Revolut reported an additional 300,000 new customers in a month.
Many factors are fueling rapid crypto adoption growth. Institutional investors have played a significant role, and they are the main reasons why BTC (Bitcoin) has spiked in a short time. Big strategic companies embracing cryptos also like Revolut had a significant impact on crypto performance. For example, PayPal recently launched crypto facilities for its users in 2020, and so far, it has cleared up to $242 million in crypto sales in a day.
Will history repeat itself?
From the last main BTC (bitcoin) bull run in 2017, retail investors and traders quit after they felt they had made enough profits. Well, there are chances that history may repeat itself. This time though, there is a buffer, and even if history repeats itself, it will not significantly impact.
It is hard to swallow the pill as bitcoin transactions are pseudonymous, and thus crypto analysts may not be very accurate in their judgment. It is hard to track the individual identities to know if they are retail investors or not, then make a judgment.
The bottom line is the underlying fundamentals have changed since there are more players in the market. There is also more liquidity, which means that even its traders move cash out of the crypto ecosystem, it will still be able to stand the test of time. The high investment by institutional investors has brought in more liquidity making the crypto market more stable.
There are also more regulations for bitcoin retail investors, such as the registration of crypto trading firms. This will make the relevant financial bodies to be accountable to their customers and strategize well. The US SEC is also on the lookout for compliance.
In short, all these are signs that retail investors are here to stay.