The cryptocurrency market in 2025 is experiencing a structural shift: institutional funds account for about 95% of the total inflow, while retail investors are left with only 5%-6%. Senior executives at Polygon Labs pointed out that this is not the end of decentralization, but a natural evolution brought about by mature infrastructure. Cryptocurrencies are transitioning from speculative assets to core technology within the global financial system.
(Background summary: Bernstein: Bitcoin’s four-year cycle has ended! The institutional era begins “extended bull market,” BTC peaks at $200,000 in 2027)
(Additional background: Financial Supervisory Commission’s Peng Jinlong: Taiwan’s stablecoins will be issued first by “financial institutions,” with the earliest launch in June 2026)

Table of Contents

• Infrastructure maturity drives institutional shift
• Two main drivers of institutional entry
• Retail exit is non-permanent loss
• Institutional participation will not weaken decentralization
• Innovative paths under a compliant environment
• Market outlook: stability and interoperability as key factors

In 2025, the cryptocurrency market marks a turning point: institutional investors become the dominant force, while retail investors significantly cool off. Aishwary Gupta, Head of Global Payments and Physical Assets at Polygon Labs, recently stated in an interview that institutional funds now make up about 95% of overall crypto inflows, with retail investors accounting for only 5%-6%. This indicates a significant change in market dominance.

Infrastructure maturity drives institutional shift

He explained that the shift by institutions is not driven by sentiment but is a natural result of mature infrastructure. Asset management giants like BlackRock, Apollo, and Hamilton Lane are allocating 1%-2% of their portfolios to digital assets, accelerating their布局through ETFs and on-chain tokenized products. Gupta cited examples of Polygon’s collaborations, including JPMorgan testing DeFi trading under the regulation of the Monetary Authority of Singapore, Ondo’s tokenized government bonds project, and regulated staking by AMINA Bank, demonstrating that public chains can now meet the compliance and audit requirements of traditional finance.

Two main drivers of institutional entry

The two primary motivations for institutional participation are yield demands and operational efficiency. The first phase focuses on obtaining stable returns through tokenized government bonds and bank-grade staking; the second phase is driven by efficiency improvements brought by blockchain, such as faster settlement speeds, shared liquidity, and programmable assets. This has prompted large financial institutions to experiment with on-chain fund structures and settlement models.

Retail exit is non-permanent loss

In contrast, retail investors’ withdrawal mainly results from losses and trust erosion during the previous Meme coin cycle. However, Gupta emphasized that this is not a permanent loss. As more regulated and transparent risk products emerge, retail investors are expected to gradually return.

Institutional participation will not weaken decentralization

Addressing concerns that institutional entry might weaken the decentralization ethos of crypto, Gupta believes that as long as the infrastructure remains open, institutional involvement will not centralize the blockchain but instead enhance its legitimacy. He pointed out that future financial networks will be a融合of DeFi, NFTs, government bonds, ETFs, and other asset classes coexisting on the same public chain.

Innovative paths under a compliant environment

Regarding whether institutional dominance might suppress innovation, he acknowledged that in a more regulated environment, some experiments may be limited. However, in the long term, this will help build more robust and scalable innovation pathways, rather than relying on rule-breaking and high-speed trial-and-error.

Market outlook: stability and interoperability as key factors

Looking ahead, Gupta stated that institutional liquidity will continue to enhance market stability. As speculative activities decrease, volatility will decline, and RWA tokenization along with institutional-grade staking networks will develop rapidly. Interoperability will also become critical, requiring infrastructure capable of seamless cross-chain and cross-layer asset transfers.

Gupta emphasized that institutional entry is not a “takeover” of crypto by traditional finance but a共同construction of new financial infrastructure. Cryptocurrencies are evolving from speculative assets to foundational core technology of the global financial system.

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