Polygon Executive: By 2025, institutions will heavily enter the crypto market, and retail investors' exit is only a temporary phenomenon

By: Centreless

In 2025, the cryptocurrency market will experience a structural turning point: institutional investors will become the dominant force, while retail investors will significantly cool down. Aishwary Gupta, Head of Global Payments and Physical Assets at Polygon Labs, recently pointed out in an interview that institutional funds now account for about 95% of total cryptocurrency inflows, with retail investors making up only 5%-6%, marking a significant shift in market dominance.

He explained that this shift by institutions is not emotion-driven but a natural result of infrastructure maturity. Major asset management firms such as BlackRock, Apollo, and Hamilton Lane are allocating 1%-2% of their portfolios to digital assets, accelerating their deployment through ETFs and on-chain tokenization products. Gupta cited examples of Polygon’s collaborations, including JPMorgan testing DeFi trading under Singapore’s MAS regulation, Ondo’s tokenized government bond project, and regulated staking by Amina Bank, all demonstrating that public blockchains are now capable of meeting compliance and audit requirements of traditional finance.

The two main drivers for institutional entry are yield demand and operational efficiency. The first phase primarily focuses on obtaining stable returns through tokenized government bonds and bank-grade staking; the second phase is driven by efficiency improvements brought by blockchain technology, 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.

In contrast, the retreat of retail investors mainly stems from losses and trust erosion caused by the previous Meme coin cycle. However, Gupta emphasized that this is not a permanent loss. As more regulated and transparent products emerge, retail investors will gradually return.

Regarding external concerns that institutional entry might undermine the decentralization ethos of cryptocurrencies, Gupta believes that as long as infrastructure remains open, institutional participation will not centralize the blockchain but rather enhance its legitimacy. He pointed out that future financial networks will be an integrated ecosystem where DeFi, NFTs, government bonds, ETFs, and other asset classes coexist on the same public chain.

On whether institutional dominance might suppress innovation, he admits that in a more compliance-focused environment, some experiments may be limited. However, in the long run, this will help the industry build more robust and scalable innovation pathways rather than relying on high-speed trial and error that “breaks rules.”

Looking ahead, he stated that institutional liquidity will continue to enhance market stability. After the reduction of speculative activities, volatility will decrease, and the tokenization of RWAs and institutional-grade staking networks will develop rapidly. Interoperability will also become key, requiring infrastructure that allows seamless asset transfer across chains and aggregation layers.

Gupta emphasized that institutional participation is not a “takeover” of cryptocurrencies by traditional finance but a process of jointly building new financial infrastructure. Cryptocurrencies are gradually evolving from speculative assets into core underlying technology for the global financial system.