Ethereum’s strong performance in the second quarter is a testament to rising institutional demand, according to analysts. But futures data shows a divergence as retail investors appear to be on the sidelines.
The primary drivers of this divide are a lack of capital, unequal access to information, and a difference in mindset between the two cohorts, according to experts who spoke to Decrypt on Tuesday.
At the time of writing, Ethereum is overcoming macro headwinds, undoing last week’s losses with a 7.75% jump from Sunday’s low, according to CoinGecko. ETH is currently changing hands for $3,661.11 after having gained 3% in the past day.
The total net assets held within U.S. spot Ethereum exchange traded funds, or ETFs, reached a record high of $21.52 billion on July 31.
Experts have said it’s a clear sign of institutional appetite.
"Institutional clients turn to regulated digital asset platforms to hedge macro risk," Emma Shi, Head of HashKey OTC, told Decrypt.
The top two cryptos serve as “alternative stores of value and potential hedges" and are increasingly being considered in this context.
This trend is a result of the activity of corporate treasuries like Bitminer (BMNR), which emerged as the world’s largest holder of Ethereum, currently possessing a staggering 833,000 ETH, worth $3 billion.
"We have separated ourselves among crypto treasury peers by both the velocity of raising crypto NAV per share and by the high liquidity of our stock," BitMine's Chairman Tom Lee said in a statement yesterday.
Lookonchain data provides an even more granular view of recent Ethereum buying, showing 14 fresh wallets have amassed 856,554 ETH since July 9.
Three of these wallets scooped 63,837 ETH, worth $236 million, through over-the-counter (OTC) desks at FalconX and Galaxy Digital.
Retail and Institutional Divergence
Contrasting this robust institutional demand is data from crypto intelligence platform Kiyotaka that indicates a more hesitant approach from retail investors.
The long/short ratio held by ETH futures traders has been on a downtrend since April. It suggests a pattern of underallocation and a general "sidelined" posture, the crypto analytics platform noted on X.
Large investors “benefit from scale” and have access to “sophisticated DeFi strategies,” which are often “out of reach or inefficient for smaller holders,” Naman, Co-Founder & CEO of NodeOps, told Decrypt, highlighting the aforementioned divergence.
Echoing Naman’s sentiment, Shi at HashKey outlined that the difference in “mindset” is what sets retail and institutions apart.
While retail participants have a “defensive” mindset and focus on “recovering capital before considering new investments,” large players treat dips as a “discount” and view them as buying opportunities.
Unlike retail traders who are generally characterized by their short-term holding windows, sophisticated holders think long-term, Shi said. Digital asset treasuries accumulating Ethereum highlights the importance of "robust risk management frameworks" and a focus on "long-term conviction in Ethereum’s ecosystem," she added.
Retail traders are also hampered by lack of low interest rates, fewer arbitrage opportunities, and the kind of tradeable information common in asset manager circles, Shi said.
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