The Final Mile to Drive the Bull Market: When Will the Departed Retail Investors Return?

As the current downturn in the cryptocurrency market persists, cryptocurrency analyst Miles Deutscher points out that the "retail investors" have already left the market, making the market cycle for 2024 full of uncertainties. The return of retail investors and external funds has become a key issue.

Reviewing the Rise and Fall of the Crypto Market from 2021 to 2023

Miles Deutscher addressed the question "Will retail investors return to the crypto market?" in a post, emphasizing the importance of closely monitoring this issue in the current market cycle, which requires a review of the market's past developments.

2021: Market Soared with Retail Investors Flocking In

Firstly, the crypto market witnessed an unprecedented explosive growth from March 2020 to November 2021, with overall market capitalization and various mainstream and altcoins seeing gains of tens to hundreds of times. Deutscher attributed this to factors such as home isolation, abundant tokens, and stimulus measures, crediting the "retail investors" and "external liquidity" for this surge.

2022: Bubble Burst Hits Retail Investors Hard

However, the party came to an end in the first half of 2022, with the collapse of the algorithmic stablecoin protocol Terra/Luna becoming the final straw that crushed the crypto market:

Remember, 80% of profits occur in the last 20% of the cycle time-wise, and in this final 20%, retail investors typically flood the market.

The Past and Future of DeFi Stablecoins: Post Terra UST Collapse Reflections

Deutscher acknowledged that cryptocurrency is an extremely reflexive asset class, where higher prices attract more attention and further drive price increases, but this is also its dangerous aspect:

In 2021, an unprecedented influx of people entered the cryptocurrency market when it was ubiquitous; by 2022, these newcomers experienced the largest losses in history, casting a shadow of fraud over the entire crypto industry.

He added, "At that time, whether or not retail investors were affected, they left the market with the bear market and severely damaged the reputation of the entire industry."

2023: This Bull Market is Different

After a prolonged period of stagnation, there was a significant shift in market sentiment in mid-2023.

In June 2023, the world's largest asset management company, BlackRock, announced the filing of a Bitcoin spot ETF for listing:

This not only symbolized the emergence of a potential market catalyst but also signified a fundamental change in large institutions' views on Bitcoin.

By January 2024, 12 Bitcoin spot ETFs had officially launched, rewriting history and attracting over $17.8 billion in massive demand and capital inflows, driving BTC to skyrocket to $73k at one point.

Is the Crypto Industry Facing Its "Darkest Moment"? Will the Crypto Boom End Once Traditional Finance Enters?

Reasons Behind Retail Investors' Departure

However, as Bitcoin broke historical highs, most veterans were eagerly awaiting the next surge in altcoins, but nothing happened.

Deutscher summarized several reasons that differentiate this market cycle from others:

1. Different Driving Forces: The primary driver of the current cycle is the BTC ETF, which is vastly different from macroeconomic conditions driving the previous cycle.

2. Change in Fund Flows: External funds flowed to the ETF after its introduction instead of directly entering the market, making past chart data seemingly less effective.

3. Significant Altcoin Differentiation: The introduction of too many new coins led to insufficient new fund inflows.

4. Lack of Retail Investors' Trust: The industry's reputation suffered a severe blow in 2022, affecting retail investors' confidence and funds.

Reasons for the Absence of Altcoin Season? Altcoin Diversification: A Hidden Threat to the Cryptocurrency Market

He noted that these reasons have caused most retail investors, the market's largest liquidity source, to exhaustively exit the market, resulting in low market liquidity:

Unlike 2021, the crypto market no longer has a continuous stream of new funds supporting it; we are essentially competing for the same funds.

What Can Attract Retail Investors Back?

Nevertheless, Deutscher outlined several factors and backgrounds favorable for retail investors' return:

Bitcoin Hits Historical Highs

He admitted that this might be the only truly significant development for the crypto market now: the historical breakthrough in BTC prices, which will eventually reignite external interest in cryptocurrencies:

Although the inherent problem of severe altcoin differentiation persists, BTC's rebound equals media attention, prompting people to enter the market before altcoins surge and reigniting optimism.

New Cryptocurrency Use Cases

He then mentioned that for cryptocurrencies to sustainably develop in the long term, stronger cryptocurrency technology use cases need to emerge. While most applications have not found their footing, areas like AI, gaming, and DeFi represent potential breakthroughs:

I hope some killer applications will emerge; cryptocurrency only needs 2 to 3 applications to become popular to drive mass adoption.

It's Not Late Enough Yet

He stated that humans are natural gamblers, and cryptocurrencies are the best casino in the world. Perhaps the reason retail investors have not returned is quite simple: the crypto market has not bounced back yet:

As mentioned earlier with the 80/20 rule, retail investors always come late, and in terms of cycle timing, we may still be too early relatively.

Deutscher: Prepare Well and Wait for the Right Moment

Deutscher concluded by emphasizing that while the 2024 crypto cycle fundamentally differs from previous ones, the return of retail investors may not require much speculation and often comes unexpectedly:

Most retail investors have valid reasons for leaving, and it is these reasons that make this cycle different from others; however, the return of retail investors typically does not require many conditions and may even come earlier than you think.