Reading the crypto news lately, you’d think all the market action amounts to a few “whales” pushing prices around. Terra (LUNA-USD) buying up Bitcoin (BTC-USD) for its stablecoin reserves was a major contributor to the March rally. And when someone comes up with a better bridge between blockchains – as Stargate Finance (STG-USD) says it has – Alameda Research swoops in to buy all the tokens in STG’s initial offering.
So…what about the rest of us? After all, any healthy market needs broad participation. Let’s see what the “retail investors” – as we’re known on Wall Street – are up to in the New Digital World.
Cryptocurrency Goes Mainstream
Not only are the long-term gains getting pretty enviable, with crypto becoming the best-performing asset class of 2019, 2020, and 2021… Cryptocurrency has emerged as a safe harbor in these times of global chaos and inflation.
Did you know that some countries are experiencing 50% currency devaluation – or worse? Here in the United States, we’ve hardly been spared from the rising cost of, well, everything… But that really puts our 7% inflation in perspective. Bitcoin is pretty darn volatile too, of course, but at least BTC’s volatility is going down!
In these troubled economies – as Gemini’s new Global State of Crypto reveals – people are “more than 5 times as likely to say they plan to purchase crypto in the coming year.”
“In Brazil, where the local currency has been devalued by more than 200% against the USD, 41% of respondents own crypto,” the report goes on. In the United States, we’re more likely to be “crypto-curious” at this point, as is Europe. Roughly 20% of survey respondents in these nations currently own crypto, while 45%-50% were crypto-curious.
Notably, the crypto holdouts are no longer saying they haven’t bought because “bitcoin is for criminals” or “bitcoin isn’t real money,” like they might have five years ago. Now, the top barriers are simply education and knowledge of crypto.
Crypto is also becoming more diverse, according to Gemini. Among Americans specifically, crypto was an overwhelmingly Caucasian activity as recently as 2020… But as of 2021, white people represented 55% of crypto owners, while people of color grew their slice of the pie significantly. Overall, more women than men told Gemini they were crypto-curious. And in developing nations with rapid crypto adoption, more women are investing. Perhaps the “crypto bro” stereotype is starting to break down!
Individual Investors Flock to BTC and ETH
Out of all the different cryptos they could choose from, which have gotten the most love? The classics: bitcoin and ether.
The table below ranks cryptos by active wallets of a “retail investor” size: $1 to $10,000 worth of the crypto. I wasn’t able to find this data on Binance Coin (BNB-USD), but with 9.5 million total active wallets (according to Nansen), that one could be a contender as well.
However, no cryptos even come close to the number of retail wallets holding BTC and especially ETH:
Source: Messari, SolanaBeach.io
Dogecoin has roughly 2.5 million wallets holding $1-$10,000… While Shiba Inu has more like 1 million. Meanwhile, the number of bitcoin wallets of this size rivals the population of Tokyo – the world’s largest city – while ETH wallets are nearly double that.
What Does All This Mean For Prices Going Forward?
On Monday, Blockware analyst Will Clemente did some chartwork on BTC, in particular.
Clemente looked at the 30-day net change in BTC holdings by retail investors… which he defined as holding 1 BTC ($46,000) or less. He found they’re “buying at the second-highest rate in Bitcoin’s history.” And the size of this “FOMO spike” has him concerned:
This is a really interesting chart. Retail (0-1 BTC) is currently buying at the second-highest rate in Bitcoin's history.
Looking at retail's holdings most spikes have coincided with macro tops, but on several occasions, they have bought strategically. This spike is an outlier. pic.twitter.com/PcGxsoCVku
— Will Clemente (@WClementeIII) April 4, 2022
“Either we are doomed or retail has chosen to use Bitcoin as a savings account and opt out of the fiat system,” Clemente concludes. “The optimist in me hopes it is the latter.”
I do see reason to be optimistic. First of all, crypto adoption has picked up worldwide. But even going by Clemente’s chart… we’re pretty far from the level of the biggest FOMO spike – the one that preceded the 2018 bear market. It took months to reach the peak. And when you look at the next biggest spike, in 2020, that one preceded a nice run-up through 2021.
This is more what our analysts are expecting. In his latest update to his Crypto Investor Network, Luke Lango expressed concern that BTC failed to break through $50,000 after completing its “pennant” chart pattern – but, even so, “the long-term outlook remains promising.”
“Adoption will be the ultimate driver of crypto prices in the long term,” Luke writes. “Just as earnings drive stock prices over multi-year periods, adoption trends will drive crypto prices over multi-year periods. So long as adoption trends remain favorable, cryptos will trend higher over a multi-year period.”
Ultimately, Luke and his team of analysts “remain confident that the crypto markets will move significantly higher over the next 12+ months.”
As to which cryptos look the most promising – or the most disastrous… Our Crypto Investor Network team has recently produced several actionable research reports: from The Third Wave of Tokenization Wealth… to 27 Cryptos to SELL Before They Die. All of them are completely free for members. Click here to learn more and get started.
On the date of publication, Ashley Cassell did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines. To have more news from The New Digital World sent to your inbox, click here to sign up for the newsletter.
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