Is institutions dominating the crypto market the end of decentralization or the beginning of a new era?
The crypto market will usher in a structural turn in 2025: institutional funds account for about 95% of the overall inflows, leaving only 5%-6% for retail investors. Polygon Labs executives pointed out that this is not the end of decentralization, but a natural evolution brought about by the maturity of the infrastructure. Cryptocurrency is transforming from a speculative asset to a core technology of the global financial system.
(Preliminary summary: Bernstein: The four-year cycle of Bitcoin is over! The institutional era has begun an "extended bull market", and BTC will reach a peak of US$200,000 in 2027)
(Background supplement: Financial Supervisory Committee Peng Jinlong: Taiwan's stable currency will be issued by "financial institutions" first and will be launched as soon as June 2026)
Contents of this article
2025 In 2017, the cryptocurrency market ushered in a structural turning point: institutional investors became the absolute main force, while retail investors cooled down significantly. Aishwary Gupta, global head of payments and real assets at Polygon Labs, pointed out in a recent interview that institutional funds now account for about 95% of the overall inflow of cryptocurrency, with only 5%-6% of retail investors remaining. Market dominance has changed significantly.
Maturity of infrastructure drives institutional transformation
He explained that institutional transformation is not driven by emotions, but is a natural result of mature infrastructure. Asset management giants including BlackRock, Apollo, and Hamilton Lane are allocating 1%-2% of their investment portfolios to digital assets and accelerating their deployment through ETFs and on-chain tokenized products. Gupta cited Polygon's cooperation cases as examples, including JPMorgan Chase's testing of DeFi transactions under the supervision of the Monetary Authority of Singapore, Ondo's tokenized government bond project, and AMINA Bank's regulated pledge, etc., which all show that public chains can already meet the compliance and auditing needs of traditional finance.
The two major driving forces for institutional entry
The two major driving forces for institutional entry are revenue demand and operational efficiency. The first phase mainly focuses on obtaining stable returns through tokenized treasury bonds, bank-level pledges, etc.; the second phase is driven by the efficiency improvements brought by blockchain, such as faster settlement speeds, shared liquidity and programmable assets, which prompts large financial institutions to experiment with on-chain fund structures and settlement models.
The exit of retail investors is not a permanent loss
In contrast, the exit of retail investors is mainly due to the losses and loss of trust caused by the previous Meme currency cycle, but Gupta emphasized that this is not a permanent loss. As more regulated and risk-transparent products emerge, retail investors will gradually return.
The entry of institutions will not weaken the concept of decentralization
In response to external concerns that the entry of institutions will weaken the concept of decentralization of cryptocurrency, Gupta believes that as long as the infrastructure remains open, institutional participation will not centralize the blockchain, but will enhance its legitimacy. He pointed out that the future financial network will be an integrated system in which multiple types of assets such as DeFi, NFT, treasury bonds, and ETFs coexist on the same public chain.
Innovation paths in a compliance environment
As to whether institutional dominance will inhibit innovation, he admitted that some experiments will be limited in an environment that pays more attention to compliance, but in the long run, this will help the industry build a more robust and scalable innovation path, rather than relying on "breaking the rules" high-speed trial and error.
Outlook for the market outlook: Stability and interoperability are key
Looking forward to the market outlook, he said that institutional liquidity will continue to improve market stability, volatility will decrease after speculation reduces, and RWA tokenization and institutional-level staking networks will develop rapidly. Interoperability will also be key, with institutions requiring infrastructure that can seamlessly move assets across chains and aggregation layers.
Gupta emphasized that the entry of institutions is not a "takeover" of encryption by traditional finance, but a process of jointly building a new financial infrastructure. Cryptocurrency is gradually evolving from a speculative asset to the core underlying technology of the global financial system.
