What does the difference between stock investors and cryptocurrency investors indicate?

In Q3 2025, individual investors accounted for approximately 20% of total stock trading volume in the US, reaching the second-highest level in history. Conversely, the cryptocurrency market is experiencing a clear shift as institutional capital increasingly dominates, while participation from retail investors declines.

This divergence between the traditional stock market and digital assets raises many important questions about market maturity, volatility, and growth prospects of both asset classes as 2026 approaches.

Stocks attract retail investors, cryptocurrencies shift toward institutions

The strong increase in retail investor activity has significantly changed the structure of the stock market. According to data from Kobeissi Letter, the trading share of retail investors in Q3 2025 reached the second-highest level ever recorded, only behind the meme stock boom in Q1 2021.

Retail investors now hold 20% of stock trading volume in the US | Source: X/The Kobeissi Letter Before 2020, the average participation rate of retail investors was around 15% for many years, so the current figure of 20% is particularly meaningful. Notably, this rate has surpassed individual holdings of institutional groups: long-term mutual funds and traditional hedge funds each accounted for about 15% of trading in the past quarter, half of what they represented in 2015. Overall, all fund groups, including quantitative funds, only accounted for 31% in Q3.

Kobeissi Letter states: “Retail investors are dominating the market at an unprecedented pace.”

On the other hand, the cryptocurrency market is witnessing the dominance of institutional capital. While previous rallies were mainly driven by retail investors, 2025 marks a clear shift toward institutional advantage. JPMorgan reports that retail investor participation in the crypto market has decreased significantly. The bank notes:

“Cryptocurrencies are transitioning from a venture capital ecosystem to a tradable macro asset, supported by institutional liquidity rather than retail speculation.”

The decline in the crypto market has reduced demand for ETFs and put pressure on digital asset management firms. However, analysts believe that buying power has only slowed down, not disappeared entirely. According to CryptoQuant data, the amount of Bitcoin held by institutions continues to grow in 2025, while retail investors tend to move in the opposite direction.

Bitcoin holdings of retail investors and large investors | Source: CryptoQuant

The significance of this divergence

These market changes are not just about shifts in participation rates. The vigorous activity of retail investors in the stock market often reflects an environment driven by herd mentality, short-term stories, and speculative trends. When retail investors dominate, the market tends to react quickly and become more volatile based on news and sentiment.

Conversely, the dominance of institutions in the crypto market is seen as a sign of future maturity and stability. Larger institutional capital means deeper liquidity, more stable prices, and (theoretically) lower volatility. Institutions typically have a long-term outlook and better risk management capabilities, helping asset prices grow steadily rather than fluctuate wildly.

However, the outlook for cryptocurrencies remains cautious. Barclays forecasts 2026 as a year of decline for this market, suggesting that without significant catalysts, structural growth will be limited. Although the political environment in the US has become more friendly toward cryptocurrencies this year, Barclays believes this shift has already been reflected in market prices.

In summary, the differences between the two markets indicate a structural change in how risk is expressed. As the proportion of retail investors increases, stock trading becomes more emotional, while the growing role of institutions in the crypto market signals maturity, albeit with somewhat slower growth momentum. Whether this divergence is temporary or marks a long-term trend as 2026 approaches remains an open question that time will answer.