Where is Retail Trading Now, and Will It Ever Return to Cryptocurrencies?
The entire bull market hinges on these two questions.
In this discussion, I'll address them in depth.
To truly understand whether retail trading will ever return, we need to look back at what brought us to this point.
2021 was a breakout year for cryptocurrencies. From March 2020 to November 2021, the cryptocurrency market surged by 2,672%, with many altcoins delivering 50-100x returns or more. It was the perfect storm.
While Bitcoin was a strong performer, altcoins stole the spotlight. Coins like SOL, FTM, AVAX, and LUNA saw gains of 500x or more. During this time, choosing specific assets wasn't crucial; you could pick nearly any coin and see quick profits.
But as is often the case with bubbles, it all ended in disaster. It's important to remember that 80% of profits are typically made in the final 20% of a cycle. Moreover, it is during these last 20% that retail investors flood the market.
Cryptocurrencies are highly reflexive assets, meaning that as prices rise, the market attracts more attention, which in turn fuels further price increases. This reflexivity is what creates so many opportunities in the market.
Cryptocurrency technically peaked in November 2021. But the final devastating blow came in May 2022 with the collapse of LUNA and UST. In just a few days, $45 billion was wiped off the market, leading to hundreds of billions in losses across the broader cryptocurrency market.
For many retail investors, this was their first experience with the real risks of cryptocurrencies—and investing in general. Unfortunately, the pain was exacerbated by the fallout from the LUNA crash and the dubious practices of various bad actors. These included:
- Celsius
- BlockFi
- Voyager
And, of course, the infamous FTX, one of the largest and, at the time, most trusted cryptocurrency exchanges.
2021 saw the largest influx of new participants in cryptocurrency history. Crypto was everywhere: in football stadiums, on national television,