The introduction of spot Bitcoin exchange-traded funds (ETFs) has caused a major shift in the crypto market, affecting both institutional and retail investors. Retail investors, represented by mom-and-pop investors, are now gaining exposure to Bitcoin through their advisers who invest in spot BTC ETFs. This trend will likely make Bitcoin a common asset in household investment portfolios, similar to gold. Early cryptocurrency investors, known as the “OGs” of the market, invested in Bitcoin for its decentralization and resistance to censorship. With the mainstream adoption of Bitcoin, they have lost their advantage and are likely to rebel against the changing market dynamics.
Bitcoin has deviated from its original purpose of replacing the broken payments system and has become part of the financial system it sought to disrupt. This situation is similar to a hidden gem restaurant gaining popularity and being taken over by a large corporation, resulting in a decline in quality and loss of its initial purpose. While Bitcoin’s price will rise as more buyers enter the limited supply market, it will primarily benefit big asset managers who earn significant profits from managing BTC spot ETFs. This contradicts the essence of Web3, which aimed to provide intermediary-free access to blockchain and decentralized finance.
This market polarization will lead to a division between retail investors willing to pay the price for Bitcoin investments and those seeking free alternatives that stay true to the ethos of crypto. The latter group will likely drive the anticipated altcoin season, where alternative cryptocurrencies outperform Bitcoin. Ethereum has already shown signs of surpassing Bitcoin’s performance, indicating a potential breakout soon. As institutional and traditional investors add Bitcoin to their portfolios, the crypto retail market will become more divided, leading to a reallocation of assets into altcoins.
During this rebalancing, certain altcoins may rise to the “too-big-to-fail” status previously associated only with Bitcoin. This cycle will determine which altcoins will survive and thrive in future bull markets. Not all retail investors will abandon Bitcoin entirely, as it provides stability and acts as a core asset in portfolios to balance higher-risk investments. As Bitcoin’s dominance grows, some OG investors may seek more decentralized alternatives and higher gains.
Regardless of the rebalancing outcome, institutions will benefit from the market shift. Retail investors leaving Bitcoin will have little impact on its price due to its scarcity, growing demand, and institutional inflows. This shift will significantly impact the decentralized finance (DeFi) market, which currently has a much smaller total value locked (TVL) compared to Bitcoin’s market cap. A rotation of funds from Bitcoin to altcoins could lead to explosive growth in the DeFi market.
The arrival of spot BTC ETFs has created a divided market between traditional retail investors and OGs. This division will drive the altcoin season and reshape the future of the DeFi market. Whether investors stick with Bitcoin or explore alternative cryptocurrencies, an exciting summer awaits in the crypto space.
