Author: Jasper De Maere, Wintermute
Compiled and organized by: BitpushNews
Bitpush Note:
As a leading market maker in the cryptocurrency industry, Wintermute handles billions of dollars in trading volume every day. Unlike ordinary researchers, they can penetrate the fog to see the true flow of retail funds. In their latest report, Wintermute presents a cautionary view for the crypto circle: the "retail faith" that once underpinned the cryptocurrency market is wavering. In the past, cryptocurrencies and stocks often moved in tandem, but since the end of 2024, this relationship has completely reversed—retail investors have begun to make a "choose one" option between the two.
Below is the main text:
Retail activity drives the cryptocurrency market. Through speculation, reflexive buying on dips, and agile capital rotation in the token world, retail investors have defined every major market cycle. However, new data indicates that the relationship between retail investors and cryptocurrencies is changing. For some time now, we have noted that the stock market is attracting retail attention at the expense of altcoins. New data from JP Morgan's strategy department, combined with our own liquidity data, now shows that stocks and cryptocurrencies are increasingly becoming complementary risk assets.
Core Insights
Reversal phenomenon: The retail investment activity in cryptocurrencies and stocks once moved in the same direction. However, since the end of 2024, the two have shown an inverse relationship: when retail investors buy stocks, they remain quiet in the cryptocurrency market, and vice versa.
Volatility premium compression: The volatility premium of cryptocurrencies relative to stocks was once the biggest attraction for retail investors, but it is now structurally compressing, and volatility is no longer a distinctive feature of cryptocurrency investment.
Technical driving factors: Some underappreciated technical reasons have accelerated this shift, such as easier access to cryptocurrencies dismantling the "closed audience" effect; simultaneously, large language model (LLM) driven analysis is narrowing the cognitive advantage gap in the stock market, a phenomenon that has not yet occurred in the cryptocurrency space.
Traditional indicators are failing: Traditional leading indicators of crypto risk appetite (such as M2 money supply) are becoming ineffective. Investors should increasingly view cryptocurrencies through the lens of multi-asset portfolios, similar to how they treat other mature asset classes.
Reversal Phenomenon
By overlaying Wintermute's proprietary cryptocurrency retail liquidity data with JP Morgan's retail stock inflow data, we gained a new perspective on the relationship between retail stock and cryptocurrency activity.
Historically, the two have maintained synchronous movements until the end of 2024. At that time, risk appetite was high, driving both to see buying pressure simultaneously, as they both served as outlets for excess capital (see M2) and risk appetite to some extent.
However, since the end of 2024, this relationship has collapsed: with retail investors flooding into the stock market at an unprecedented pace, they have remained inactive in cryptocurrencies, causing the divergence between the two to reach historical extremes.
On a larger scale, we use the market capitalization of altcoins as a long-term proxy for retail cryptocurrency activity.
It aligns closely with our retail liquidity data and has a fairer and longer historical record. Between 2022 and the end of 2024, cryptocurrencies and stocks fluctuated roughly in synchrony, as both were viewed as a high-risk investment portfolio by retail investors. The decoupling phenomenon at the end of 2024 was very pronounced, reflecting that retail activity has become more short-term driven, highly volatile, and somewhat lacking in structure.
The rolling correlation between retail activity and the market capitalization of altcoins confirms this shift. The previously fluctuating but generally positive relationship has turned negative. Retail investors are now allocating between the two rather than injecting funds into both simultaneously.
Focusing on 2025 and overlaying key catalysts, this dynamic becomes clearer. Several points worth noting:
Memecoins and AI proxies are making headlines as stock market activities stagnate, with retail finding speculative outlets elsewhere.
Retail continues to aggressively buy on dips in the stock market, whether during the tariff policy announcement in April 2025 or in the recent market fluctuations.
After October 10, the market almost completely shifted to stocks, and this trend is currently ongoing.
Causal Relationships
The rolling correlation between retail activity and the market capitalization of altcoins confirms this shift. The relationship that was once overall positive despite fluctuations has now turned negative. Retail investors are now making choices between the two, rather than investing in both simultaneously.
This new data also confirms this. Retail activity in the stock market has become a new variable that cryptocurrency investors should closely monitor to identify potential windows for sustained inflows of retail funds into cryptocurrencies.
Volatility = The Product Itself
One reason retail investors are attracted to and remain active in cryptocurrencies is the asset's volatility characteristics. Volatility is the product. It was the initial driving force that drew retail investors into the crypto space.
However, despite the actual volatility of cryptocurrencies still far exceeding that of the stock market, a structural trend toward compression has developed, and this trend is unlikely to reverse in the short term. The volatility ratio of BTC to the Nasdaq Index (NDX) has continued to decline, compressing to below 2x in the first half of 2025.
Reflections on key drivers:
Maturation of the market: As mature investors and new liquidity tools such as ETFs and DATs have increased, the reflexive volatility peaks defined in earlier cycles have been smoothed out.
Market capacity: With a market value of $2.3 trillion (even 40% lower than the historical peak), the funds required to move the market far exceed those needed five years ago.
As volatility compresses, the core selling point of cryptocurrencies to retail also erodes. The "excess volatility" that defined the 2021-2022 cycle and attracted a generation of retail investors no longer exists. For retail investors who pursue volatility, stocks are becoming increasingly attractive.
Technical Factors
In addition to the structural changes within the crypto market itself, some technical factors are also accelerating this shift, which is rarely mentioned.
Facilitating access to cryptocurrency—Fintech companies and traditional brokerage platforms are increasingly integrating crypto trading (or introducing stock trading to crypto-native platforms), which indeed lowers the entry threshold, but its more profound impact is reflected in the exit of funds. In previous cycles, the cumbersome deposit process made it easy for the funds once投入 in the crypto market to be "locked" in, naturally circulating among various tokens. However, now, these smooth deposit and withdrawal channels mean that funds can freely flow between the stock market and cryptocurrency market, facing no significant barriers.
Gaining information advantage—retail seems increasingly attracted to the stock market, partly because they have gained an unprecedented "analytical advantage" through artificial intelligence (AI). Large language models (LLM) have greatly enhanced the analytical capabilities of retail investors, making them feel as though they can compete on an equal playing field with institutions.
Yet this feeling does not exist in the cryptocurrency market. While it is feasible to analyze cryptocurrencies based on data, the crypto market lacks a consensual valuation framework, the value capture mechanisms for tokens are unclear, while the increase in investable targets makes it difficult for retail to feel that they are "gaining an advantage."
Conclusion
Retail investors, once the most reliable source of self-reinforcing demand in the crypto market, are increasingly satisfying their risk appetite elsewhere.
The stock market not only provides increasingly competitive volatility but also offers a growing analytical advantage, enabling a seamless transition from crypto to stock trading through applications already available on retail investors' phones.
Cryptocurrencies still hold a place in retail portfolios, but they are now just one of many options and no longer the main battleground for speculation.
This shift should also reshape investors' perspectives on the market. Some validated traditional indicators have already become ineffective. For crypto investors, simply identifying leading indicators of risk appetite and combining them with crypto-native frameworks is no longer sufficient for success. Investors need to increasingly view cryptocurrencies from the perspective of cross-asset portfolios, just as standard practice in stocks and fixed income sectors.
免责声明：本文章仅代表作者个人观点，不代表本平台的立场和观点。本文章仅供信息分享，不构成对任何人的任何投资建议。用户与作者之间的任何争议，与本平台无关。如网页中刊载的文章或图片涉及侵权，请提供相关的权利证明和身份证明发送邮件到support@aicoin.com，本平台相关工作人员将会进行核查。
