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Institutional Crypto Investors vs Retail Crypto Investors: Understanding the Difference

27 Aug 2022 By : Sudeep Saxena
Southeast Asia’s Lar


Synopsis 

When finance giants are entering the crypto markets, understanding their reasons, intentions, and vision can be critical in planting your future investment strategies. In this report, we are going to deliberate on the differences between institutional and retail crypto investors, giving you a bird’s eye view of the subject.


Growing as an intermediary of value transfer, cryptocurrency is attracting the interest of people from different walks of life. Within no time crypto has been able to gain appreciable popularity amongst the masses resulting in the generation of a massive low-ticket investment pool. After remaining off-shore from the crypto investments for a long time, big bulls of the market are desperately searching for a way in. 

With a substantially loftier purchasing power, effective investing strategies, and higher risk-bearing capacities, institutional crypto investors have the potential to drive the market as per their interests. However, the decentralized nature of the blockchain and the presence of a large number of retail investors, regulate their moves.

In the article ahead, we are going to discuss in detail institutional crypto investors, how they are different from retail crypto investors, and how they are going to shape the future of cryptocurrencies in the upcoming years. 

Types of Crypto Investors

Before we dive into reading more about institutional and retail crypto investments, let us understand a bit more about a general classification of crypto investors. There are no designated classifications of investors in the crypto world however, we can segregate them using their broad investment attributes.

Crypto Holders or Long Term Investors

Crypto holders are those investors who believe in ‘buy and forget’ investment strategies. A sheer volume of major crypto tokens is being held by those long-term investors who believe in the project and do not intend to sell their assets any time soon.

Crypto holders not only incite stability into the crypto markets but also assist in generating trust in newer projects.

Curious Crypto Explorers

Crypto explorers are those crypto investors who are new to the blockchain world. Crypto explorers generally entertain diverse portfolios to reduce their risk and do not go for big-ticket purchases. These investors are transitory and fit into any of the other categories once they understand their crypto investment game.

Daily Crypto Traders

These are those crypto investors who play around with the market fluctuation and make their profits using short-term investments. Crypto trading has become extremely popular with time and has been able to general multifold returns within days for many lucky investors. 

Institutionalized Crypto Investors

Institualized crypto investors are those organizations that invest in cryptocurrencies on behalf of their clients and charge them for generating a profit on their investments. These institutions are generally responsible for sizable market fluctuations as they tend to buy in bulk. We will discuss institutionalized crypto investors in the next segments of this article.

Retail Crypto Investors

Retail crypto investors or the common crypto investors are those who have adequate experience in cryptocurrency and invest seriously in their portfolios. These investors are the major reason behind the evolution of cryptocurrencies as a medium of common exchange. 

What are Institutional Crypto Investors?

There was a time when no one could expect prominent financial institutes to assess cryptocurrencies as a feasible investment option. However, the rate of mainstream crypto adoption has forced them to change their outlook on the growth that is evident. 

Now is the time when traditional finance is not shying away from experimenting with the NFTs, exploring the possibilities in Metaverse, and has accepted the future that belongs to the blockchain. Some of the institutional crypto investors also include sizeable fund managers and major investment firms with the capacity to move the graphs for different cryptocurrencies. 

From MicroStrategy to Voyager and from Tesla to Coinbase, we have been able to witness some of the biggest chunks of investments in Bitcoin and Altcoins only in a matter of a few years. However, we also have some prominent individual investors aka the whales who hold significant amounts in cryptocurrencies e.g Brian Amstrong, Co-Founder Coinbase, Sam Bankman-Fried, Co-Founder, FTX, Winklevoss Brothers, and Facebook Conceptualizers. 

Types of Institutional Crypto Investors

As we discussed the crypto whales and the significant financial institutes as institutional crypto investors, can be further classified based on their holding patterns. All the crypto-holding institutions have their reasons to invest heavily in the project and the ability to move the market for their leverage. Here is a list of some of the most prominent institutionalized crypto investors in the market today.

Centralized Crypto Exchanges

To streamline the transactions within their exchanges, CEXs are bound to have a substantial amount of crypto holdings. With a total holding of over 13 % in Bitcoin, crypto exchanges are the most prominent Bitcoin holders in the world as of today.

Governments

Governments across the world are holding a sizeable amount of crypto assets through different channels. As per the reports, the US government, even after selling off their majority of the Bitcoin stake, still holds more than 70,000 BTC. The Chinese government also accounts to hold a total of 2,00,000 BTC. Bulgaria, Ukraine, and Russia are some of the other major crypto-owning governments of the world. 

Crypto Funds

Crypto Funds are those institutionalized investment organizations that stash a sizeable portion of new blockchain projects and then push it to newer heights. They assist the new blockchain projects with connections, market influence, and CMS (Crypto Management Services). 

Grayscale, the largest subsidiary of Digital Currency Group, holds more than 3.113% of the total Bitcoin supply, making it the largest institutionalized holder of the token. Grayscale also holds a significant amount of ETC, LTC, and LINK tokens. 

What are Retail Crypto Investors

Retail crypto investors belong to that group of people that invest their assets directly into the market using a crypto exchange. They invest their money on their behalf, making them responsible for their portfolio fluctuations. A systematic and long-term investment strategy is the most common trait of retail crypto investments.

With retail investing coming to the door of investors, its popularity has skyrocketed in recent years. Some of the most useful retail investment websites such as Coin Gabbar are trying to build an informed community of investors by providing them with a detailed analysis of every token. Even with lower purchasing power and unorganized investment moves, retail investors drive major market fluctuations during market hypes and panics.

Retail investing is not only reachable but also cost-effective for the end users. It has been and will continue to hold the biggest stack of crypto assets in the cryptocurrency world. 

Why does the Difference Matter?

With a possible migration from being a retail investor to an institutional investor, it can be confusing for most of those who are new to the finance jargon. With each investment made, all the investors are equally susceptible to market fluctuations, however, the risk-bearing capacities of the two differ substantially. And thus, diversifying your crypto portfolio as a retail investor is critical to reducing the overall risk. 

With multiple differences between the two, institutional and retail crypto investors are also known for complimenting each other in creating investment trends, pumping meme coins, and generating unexpected profits. The new age of crypto investment is incomplete with either of these components and the future belongs to a collective and collaborative effort.

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