Retail Still Sidelined In Crypto Rally

Retail investors are still largely staying away from the crypto markets, after being stung by the 2022 downturn. While there are signs that some ordinary retail investors may be returning, we are witnessing nothing like the interest seen during the last cycle.

Day traders, for example, appear to be staying away. Bitstamp, one of the most reliable and trusted exchanges in the world, has reported that retail training volumes on their US platform have only increased from 33% to 35% since the start of the year. Global retail volumes have risen from 8% to 9%.

One of retail traders' most important sources of information, YouTube, has not displayed a significant increase in views since crashing by around 80% from the peak in 2021.

A Punishing Bear Market

The last bear market was a particularly difficult one for retail traders, who were not only punished by crashing markets, but also lost money entirely when organizations like FTX collapsed. Similar to the situation following the fall of Mt Gox in February 2014, regular traders are steering clear. Instead, the current bull run is being driven by institutions, and by "OG" crypto traders, who are less sensitive to price fluctuations, and who will sit out the wild double-digit drawdowns for which bitcoin is so well known, even in the early stages of a bull market.

Total liquidity has been low in recent months, which is characteristic for this stage in the market cycle. The loss of market makers and major trading outfits from the ecosystem, including Alameda and FTX, has contributed to the problem.

On-Chain Indicators

Data from Look Into Bitcoin suggests that we have not yet seen the growth of smaller addresses that tends to occur when a bull market accelerates. This happened in 2017, for example, with wallets holding less than 0.1 BTC increasing by two-thirds on 2016, and almost doubling for wallets with 0.01 BTC or less.

2021 and 2022 displayed a more muted picture, possibly because so many users held crypto on centralized platforms such as Coinbase and FTX.

Another classic indicator for retail interest is Google searches. User searches for "bitcoin" have remained relatively flat this year, despite bitcoin's price almost doubling.

Although institutions and OGs are getting excited about the prospects for bitcoin and crypto more broadly, we're a long way from seeing the kind of retail FOMO that drove the last bubble.

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