Retail Investors are Making a Comeback in the Crypto Market!
Cryptocurrency has become a prominent hub for short- and long-term investments among people of different backgrounds and age groups.
02:16 25 January 2022
Over the last ten years, cryptocurrency has become a prominent hub for short- and long-term investments among people of different backgrounds and age groups. Some succeeded, and also others fell short of achieving their financial goals. This scenario is characteristic of a volatile asset, and many investors have already come to terms with it.
After all, business is not without any risks. But in reality, nobody wants to suffer from losses. Thus both institutional and retail investors are always making sure that their efforts would earn returns. As to how it could be acquired is usually a matter of wit and luck.
There are recent reports forecasting the status of the cryptocurrency market in the coming years. For some reason, it's good news. Retail investors are predicted to make a comeback as 20 million adults are expected to join the industry. Meaning, the present population of crypto investors could nearly double over the next 12 months, a report said.
This development could further expand the now-huge crypto market with multi-billion shares worldwide. And perhaps, the trading and other financial transactions in different platforms may also open new opportunities for everyone. To get a broader perspective on this progress, read the following facts.
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Why are Retail Investors Returning?
In 2017, retail investors played a significant role in placing bitcoin into the mainstream market and also pushing price volatility. But after four years, the circumstances have become different. What motivated these groups before is now developing into something more forceful as the prospect of quick profits becomes quite enticing. This is enabled by the rapidly appreciating asset class, thereby triggering the return of retail investors into the second round of attempts in the crypto ecosystem.
Unlike their initial entry to the market, retail investors might stay longer to aim for profits this time around. In part, bitcoin’s growth in the last two years is one reason for such a move. Many people have realised its value as an investment tool, and this is made popular by search engines such as Google and social media platforms such as Twitter. One of the trading platforms also reported that 200,000 new users might join the industry earlier this year.
Not surprisingly, a significant increase in trading volumes in some crypto platforms was observed. For instance, several prominent exchanges such as Coinbase and Kraken in the United States have experienced outages due to the surge of interest.
Comparing 2017 Crypto Hype and the Present
Some speculators think that this progress may be a repeat of what happened three years ago. At that time, more retail investors joined the crypto market and contributed a lot for the benefit of platforms and players, but eventually decided to slow down or leave. Based on the actual accounts, retail investors and traders exited the industry after booking profits during the previous bull run. They might do the same strategy this time - at least, that’s a possibility.
While it may look similar to what happened in 2017, some experts claim that the underlying fundamentals have changed this time. During the previous case in crypto markets, small trades by retail investors propelled higher price volatility. This caused many traders to move cash in or out of the crypto ecosystem because there was not much underlying liquidity as prices skyrocketed and crashed alternately.
The current rally in cryptocurrency prices has emerged in a different landscape. That’s why even institutional investors are gradually moving their way into the crypto market. Their presence in the network could bring much-needed liquidity, making the assets less susceptible to wild price swings due to small trades. As a result, retail investors may take a different approach this time.
What Does the Data Show?
According to a Bloomberg analysis, many investors are turning to cryptocurrency to preserve their savings against the threat of currency devaluation, send and receive remittances, and carry out other financial transactions. The adoption of such a digital asset over the last year has been fueled by institutional investments. Interest among new players has also surged, with bitcoin price tripled in the past 12 months.
In highly developed countries and those with substantial adoption of cryptocurrency, the growing transaction volume for centralised services has driven crypto usage among more people. On the other hand, peer-to-peer platforms are facilitating new adoption in emerging markets, the analysis reported. However, what remains a big question for analysts is how much adoption will likely continue on those platforms for the next 12 months, compared to new and emerging models that have yet to evolve.
Investing in cryptocurrency looks promising, as most resources would say. Sometimes the risks involved are not emphasised or overlooked by investors, resulting in unfavourable outcomes. To avoid this possibility, it is important to understand how the whole market works and what strategies are appropriate to achieve investment returns.