How are retail investors taking over the crypto market | The Financial Express

How are retail investors taking over the crypto market

It is believed that retail investors started moving towards cryptocurrency investing a couple of years back

How are retail investors taking over the crypto market

By Edul Patel

Investing is a long-term plan, whether in stocks, equities, or crypto, especially during times of high market volatility. Crypto is, comparatively, a newer asset class and, therefore, it is more prone to macroeconomic changes in the short term. Hence, investing in the long-term is a prudent strategy chosen by retailers to build wealth in crypto.

Retail investors started moving towards cryptocurrency investing a couple of years back. The crypto market has been the target of traders until 2016 for earning profits. But, 2017 has been crucial as many retail investors entered the market and drove the bull run. The move also took Bitcoin into the mainstream, which resulted in price volatility. Retailers also played a crucial role in 2021’s bull run. Earlier, this space was dominated mainly by a few large private institutions and high net-worth individuals or HNIs. 

The paradigm shift from traders to retailers was aided by two significant factors. The first one was the unfortunate COVID-19 pandemic that caused massive trouble to the traditional asset classes and drew people towards exploring the possibility of crypto as an asset class. The second factor was the $2 trillion aid, also known as quantitative easing, by the U.S. Federal Reserve to U.S. households. A massive portion of this aid found its way into the cryptocurrency ecosystem. It caused a tremendous rise in the awareness of the popularity of crypto and web3 among retail investors. Today’s retailers have started to see the potential of cryptocurrencies in this digital era to achieve financial freedom.    

As some developed countries such as the U.S. and U.K. have already started to look towards crypto assets as a viable alternative to fiat money, everyday investors are optimistic that even developing countries will soon adopt crypto. The pace at which crypto assets are becoming mainstream points to a progressive future for this asset class. 

While talking about India, it is a country where people like to save more and spend less as they are more concerned about the future in case of any uncertainty. In 2008, when most of the world was going through an economic crisis, India was one of the countries which not only showed greater resistance but also recovered faster. India’s conservative approach toward finance and savings played a vital role in sailing through the financial crisis. This economic crisis displayed the robustness of the Indian economy.   

According to the CFA Institute Investor Trust study, Indian retail investors rank highest for their trust in cryptocurrencies. Increasing retail investor awareness will enhance confidence in the sector and is the only way to grow the industry. The Supreme Court’s decision to revoke a 2018 ban on digital tokens has also created interest around the crypto. 

With increasingly easy-to-use exchange platforms, crypto investors now have no shortage of choices to invest in. One of the key attractions for most investors is the chance of earning profits by investing in small amounts. Governance tokens have also inspired investors for their prospect of shaping the market through their voting rights on how a blockchain ecosystem works. 

The crypto market attracts various types of investors with different intentions. One of the primary kinds of investors in the market is retailers. These kinds of investors invest in cryptocurrencies for personal interests. Most retail investors in crypto are driven for their advantage or life events such as retirement plans, asset buying, or savings. 

Cryptocurrency adoption is not just scaling up with everyday investors but also with corporations and countries increasingly investing in it. Many giant companies such as Microstrategy, Tesla, Square, and fashion brands like Gucci entered the space, driving the great investor base. Also, with big celebs in India, investing in crypto and NFTs has created a sense of trust among retail investors. Additionally, huge capital V.C.s funding the crypto startups added to the craze. 

Women in India have traditionally been stuck to investing in gold and silver. But, with awareness of the importance of financial independence growing, more women investors are also stepping into exploring different asset classes. The higher returns from crypto have also led them to bring their friends and family into investing too. Some women have also started to try their hands in NFTs and other digital assets. 

The country’s increased internet access has also contributed positively to boosting the investors’ scale. As the crypto industry matures, more regulatory clarity will drive even more retail investors into the space in the coming days. 

The author is co-founder and CEO, Mudrex

Also Read: Grayscale announces new wing to invest in Bitcoin mining

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First published on: 08-10-2022 at 09:39 IST