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Retail Investors Are Returning to Cryptocurrency Markets

In the Bitcoin ecosystem, a familiar face has reappeared. Retail investors are returning to the crypto ecosystem for a second innings, enticed by the potential of quick returns in a quickly growing asset class. Retail investors were a big part of the crypto market’s bull run in 2017. Their arrival at the time aided in the mainstreaming of Bitcoin (BTCUSD) and increased its price volatility. However, the circumstances may be different this time.


Retail investors, who fueled the initial bull market in cryptocurrencies, are re-entering the market.
Retail investors may be in crypto for the long haul this time, unlike last time, when they quit after making profits.
Increasing the number of users and the volume of trades
Bitcoin has become a popular investment tool with mainstream investors because to digital platforms, following a price slump that lasted more than two years. Bitcoin searches on Google have surpassed crypto craze levels, and hot Twitter topics have helped to publicize price increases. In the first week of this year, eToro, a cryptocurrency trading website, added 200,000 new users.

In comparison to last year, the company reported that it had 61 percent and 49 percent more unique Bitcoin and Ether (ETHUSD) holders. Trading volumes at the Israel-based firm increased tenfold during the same period last year, which is unsurprising.

Several well-known exchanges in the United States, including Coinbase and Kraken, have experienced downtime as a result of increased interest in bitcoin trading, some of it likely from new customers. In the last month, Revolut, a U.K.-based banking and trading software, added 300,000 new crypto clients. Meanwhile, PayPal Holdings, Inc. (PYPL), an online payments company that offered cryptocurrency services for its users last year, is said to have cleared $242 million in cryptocurrency sales in one day, a new record.

Is it going to be another year like 2017?

The introduction of retail investors and PayPal numbers as an indication of widespread adoption for cryptocurrencies has been cited by certain analysts. That, though, may be a stretch. During the previous bull run, retail investors and traders took profits and fled the crypto markets. They might do the same thing again this time. Because of the pseudonymous nature of Bitcoin transactions, where true identities are disguised by crypto addresses that may or may not belong to the same individual, analysts should approach crypto numbers with a healthy dose of skepticism.

The cryptocurrency environment may appear to be comparable to that of 2017, but its basic principles have changed. Small trades by retail investors increased Bitcoin’s price volatility during the previous bull run in crypto markets. Due to a lack of underlying liquidity, prices fluctuated erratically, rising and plunging as traders moved money in and out of the crypto ecosystem.

The present bitcoin price surge took place in a different environment. Institutional investors are gradually but steadily entering the crypto industry. Their presence has provided much-needed liquidity to cryptocurrency markets, reducing the risk of huge price movements caused by minor deals.

This time around, the regulatory barriers to retail investors dabbling in Bitcoin are also higher. The Financial Conduct Authority (FCA) in the United Kingdom, for example, launched a temporary registration scheme last month to allow investors to check if crypto trading firms are registered with the regulator. The Office of the Comptroller of the Currency (OCC) in the United States has issued notices in favor of cryptocurrencies, and a new SEC chair who is familiar with blockchain and cryptocurrencies is expected to succeed former chair Jay Clayton, who was widely chastised by crypto enthusiasts for his harsh statements about cryptocurrencies.

All of this suggests that regular investors are unlikely to abandon crypto anytime soon.

What do you think?

Written by Winston Williams

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