Get ready for more maniac institutions and memes

Source: Adobe/hallojulie
  • “Institutional capital <...> shapes the conversation, broadens support and imbues the asset class with legitimacy.”
  • Even though some retail investors are becoming a bit more mature in 2022, “new retail is still largely driven by speculation and trading with high leverage to maximize exposure.”

2021 has been a banner year for the crypto market, which institutional and retail investors have to thank for its growth. Although these two categories of investors diverged in their trading behaviors, they both entered the market in seemingly large numbers, helping to push a whole range of crypto-assets to new all-time highs.

For the most part, 2021 has seen institutions focus on bitcoin (BTC) and (to a lesser but growing extent) ethereum (ETH), while retail traders have been happy to carry on. also the trendy altcoin or meme that is currently on the rise. high in the market. However, according to industry players and observers speaking with Cryptonews.com2022 will see a relative convergence of trading preferences, with retail investors becoming increasingly mature in their approach, helped in part by a growth in market analysis and research of established institutions.

At the same time, these same commentators predict that institutions will play an increasingly important role in driving the market in the coming year, with their involvement also helping to steer regulation in a favorable direction. Conversely, the increasing maturation of the market will also mean that a portion of more risk-aware retail traders will seek high returns from more speculative crypto-assets.

Predictions and reality 2021

In 2020, speaking to Cryptonews.comanalysts have predicted that institutions will be drawn to bitcoin in 2021 as the COVID-19 pandemic continues and rising inflation makes BTC more attractive as an asset.

They also predicted that an influx of new money into bitcoin would trickle down to altcoins, taking them to new highs. Again, this is what we have widely observed, with most major altcoins seeing new all-time highs this year.

Some analysts we spoke to predicted that more companies would add bitcoin to their balance sheets. That hasn’t really materialized on a larger scale, although one of our panelists was somewhat correct in suggesting that 2021 would bring a breakthrough in the quest for a Bitcoin ETF to be approved in the US (this which he kind of did).

2022: Even bigger institutions, retail maturing

In 2022, commentators predict that institutional investors will become even more important than they have been this year.

“Institutions will have a crucial impact in 2022. To understand why, it is important to consider the shift in institutional/corporate sentiment towards crypto that took place in 2021,” said Oleksandr Lutskevych, CEO and Founder of the CEX.IO crypto exchange.

Lutskevych notes that companies that were able to scale quickly in 2021 made substantial inroads (e.g. Microstrategy, BNY Mellonetc.), setting a precedent for those who were unable to start buying or playing a role in the crypto market, largely because they lacked the infrastructure to do so.

“At this point, institutions have had ample time to prepare their programs to enter the market. On the supply side, there are products and services that allow enterprise customers to do this,” he said. Cryptonews.com.

Other commenters agree, with a spokesperson for another crypto exchange, BitMEXalso telling this site that institutions will eclipse retail in terms of impact next year.

“The influx of institutions into the crypto space as they become more comfortable and regulation progresses is likely to be the biggest source of capital,” they said.

The increasing regulation of crypto-assets is likely to play a huge role in attracting more institutions to the market next year.

“We are already seeing greater regulatory certainty attracting new institutions to digital asset markets. Accompanying them, the ecosystem of information, research, rating and advisory services, will likely have an increasing influence on investment strategies and it will be interesting to follow in 2022,” said crypto exchange chief executive Andrew Leelarthaepin. Binary stamp Asia Pacific.

The ramifications of the growing involvement of institutions in crypto is a theme also echoed by Ben Caselin, head of research and strategy at AAXa crypto exchange.

“As bitcoin and other major crypto-assets see a continued influx of institutional capital, we will also see more alignment and integration with public, corporate and even geopolitical interests. The influx of institutional capital is then not only significant in terms of price impact, but also in how it shapes the conversation, broadens support and imbues the asset class with legitimacy,” he said. Cryptonews.com.

Indeed, for Andrew Leelarthaepin, the presence of institutions will have a growing influence on at least some of the retail clientele, which could benefit from a corresponding upsurge in high-quality market research and analysis.

“It was only at the beginning of last month that Bank of America Global Search launched its cryptocurrency research division with its first report and the [bank] is probably the first of a long series. The growth of the information ecosystem will spread among retail and institutional investors to help inform strategies,” he said.

As with other industry figures, Leelarthaepin believes that the impact of regulation and the professionalization of the digital asset ecosystem will impact the behavior of retail traders.

The power of memes and retail

However, observers still believe that even if some retail investors become a little more mature in 2022, many or most will still be looking for more speculative altcoins, unlike institutions.

“Unfortunately, new retail is still largely driven by speculation and trading with high leverage to maximize exposure. It takes time and experience for retail traders to settle in, filter the noise and focus their attention and capital on high-quality projects,” said Ben Caselin.

Likewise, Oleksandr Lutskevych suspects that the “meme coin” phenomenon will continue to play a role in 2022 and beyond.

“Weighing the impact of this move is critical as retail traders have shown they have capital that can shift markets. That value is being diverted from meaningful projects and is now directed towards memes,” he said. -he declares.

Lutskevych adds that the importance of retail love for memes may be greater than many realize.

“At their peaks, DOGE and SHIB combined for a value of nearly $80 billion, or >10% of the ETH market [capitalization] at $4,400/coin and ~7% of the BTC market [capitalization] at $63,000/piece,” he said.

Another divergence we may see in 2022 is that retail investors are more drawn (than institutions) to smaller, newer coins, in the expectation that they can achieve big gains in a tight time frame.

“Smaller retail traders may be able to access initial launches more efficiently given the size of their smaller investments. 2022 could see the start of lightly structured products for new retail funds entering the space” , said the BitMEX spokesperson.

And yes, institutions will continue to largely focus on more established crypto-assets with a more proven track record.

“Institutional funds are primarily focused on bitcoin and, to a lesser extent, ethereum. Bitcoin is the best-performing asset of the decade, exhibits all the characteristics of a modern safe-haven asset, and given the fundamentals and real-time market developments, we can expect continued interest in this asset, and continued growth,” Ben Caselin said.

Although traditional financial institutions are often quite conservative, Caselin noted that crypto-asset funds can generally take on more risk.

“The infrastructural game is most in favor. Core protocols like Solana, Cardano, Avalanche, and Terra, or second-layer solutions like Polygon or Stacks, are obviously preferred over meme coins and other hype-based tokens,” he added.

Another difference between institutions and retail in 2022 will be that the former should be able to afford to invest in more than the cryptoassets themselves.

“US financial markets have proven to be a major force in BTC mining migration, as several companies have gone public or raised capital using this option (e.g. Bastion, Marathon, etc.) to expand their business. Significant investments in new and mature crypto companies will come from institutions, which will influence the growth of the space in the future,” predicted Oleksandr Lutskevych.

Sentiment remains a big player

And while there will be some maturing among retail investors in 2022, most commentators expect retail to continue to be dominated by sentiment and fear of missing out (FOMO).

“We saw the surges of opportunistic interest in meme coins. SHIB even briefly took the top spot in terms of traded volume,” Lutskevych said.

For him, this is a perfect illustration of the behavioral finance at play in retail markets.

“Market results are becoming more affected by psychological factors, like overconfidence, herd behavior, rather than fundamentals. Retail investors are likely to continue to take this sentiment-driven approach in the markets crypto and traditional in 2022,” he added.

This means that while institutions will benefit from increased influence in crypto, you should expect 2022 to once again bring its fair share of speculative fads.

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