Top Market Maker Wintermute Revealed: Are Retail Investors No Longer Trading Crypto?

Source: Wintermute

Written by: Jasper De Maere

Translated and organized by: BitpushNews

Bitpush Note:

As a leading market maker in the crypto industry, Wintermute handles hundreds of billions of dollars in daily trading volume. Compared to ordinary researchers, they can penetrate the fog and see the most authentic flow of retail funds. In this latest report, Wintermute presents a warning to the crypto community: the “retail faith” that once supported the crypto market is shaking. Historically, cryptocurrencies and stocks tended to rise and fall together, but starting from the end of 2024, this relationship has completely reversed—retail investors are now facing a “choose one” dilemma between the two.

Main Content:

Retail activity drives the cryptocurrency market. Through speculation, reflexive dip-buying, and agile capital rotation within the token space, retail investors define each major market cycle. However, new data indicates that the relationship between retail investors and cryptocurrencies is changing. For some time, we have observed that the stock market has been attracting retail attention at the expense of altcoins. New data from JPMorgan’s strategy division, combined with our own liquidity data, now shows that stocks and cryptocurrencies are increasingly becoming complementary risk assets.

Key Points:

Reversal Phenomenon: Previously, retail investment activity in cryptocurrencies and stocks moved in the same direction. Since late 2024, they have shown an inverse relationship: when retail investors buy stocks, their activity in cryptocurrencies remains subdued, and vice versa.

Volatility Premium Compression: The volatility premium of cryptocurrencies relative to stocks was once their biggest attraction for retail investors. Now, this premium is structurally shrinking, and volatility is no longer a product feature offering diversification in crypto investments.

Technology-Driven Factors: Some underappreciated technological reasons are accelerating this shift, such as easier access to cryptocurrencies breaking the “closed audience” effect; meanwhile, analysis driven by large language models (LLMs) is narrowing the cognitive advantage gap in the stock market, a phenomenon not yet seen in crypto.

Traditional Indicators Fail: Traditional leading indicators of crypto risk appetite (like M2 money supply) are losing their predictive power. Investors are increasingly viewing cryptocurrencies through a multi-asset portfolio lens, similar to other mature asset classes.

Reversal Phenomenon:

By overlaying Wintermute’s proprietary retail crypto liquidity data with JPMorgan’s retail stock inflow data, we gain a new perspective on the relationship between retail activity in stocks and crypto.

Historically, these two have been synchronized until late 2024. During that period, high risk appetite drove buying in both, as they served as outlets for excess capital (see M2) and risk sentiment.

However, since late 2024, this relationship has unraveled: retail investors have flooded into the stock market at an unprecedented rate but remained inactive in cryptocurrencies. The divergence between the two has now reached a historic high.

Looking at it more broadly, we use the market cap of altcoins as a long-term proxy indicator for retail crypto activity.

It closely aligns with our retail liquidity data and has a fairer, longer historical record. Between 2022 and late 2024, cryptocurrencies and stocks fluctuated roughly in sync, both viewed by retail as high-risk investment portfolios. The decoupling at the end of 2024 is very conspicuous, reflecting a shift toward more short-term, volatile, and somewhat less structurally driven retail activity.

The rolling correlation between retail activity and altcoin market cap confirms this shift. The previously fluctuating but generally positive relationship has turned negative. Retail investors are now reallocating between the two rather than investing simultaneously in both.

Focusing on 2025 and adding key catalysts, this dynamic becomes even clearer. Notable points include:

• Meme coins and AI proxies have gained prominence when stock market activity stagnates, as retail investors seek speculative outlets elsewhere.
• Retail investors continue to aggressively dip-buy in stocks, whether during the April 2025 tariff policy announcement or recent market volatility.
• After October 10, the market has almost entirely shifted toward stocks, and this trend persists.

Causality:

The rolling correlation between retail activity and altcoin market cap confirms this shift. The once fluctuating but mostly positive relationship has turned negative. Retail investors are now choosing between the two rather than investing in both simultaneously.

This new data also confirms that stock market retail activity has become a new variable that crypto investors should monitor closely to identify potential windows where retail funds might more sustainably flow into cryptocurrencies.

Volatility = Product Itself:

One reason retail investors are attracted to and remain active in cryptocurrencies is their volatility profile. Volatility is the product. It was the initial driver that drew retail into crypto.

However, although the actual volatility of cryptocurrencies remains far above that of stocks, its structural contraction trend has already formed and is unlikely to reverse in the short term. The volatility ratio between BTC and the Nasdaq Index (NDX) has continued to decline, compressing below 2x at times in the first half of 2025.

Thoughts on Key Drivers:

Market Maturation: As more mature investors and new liquidity tools like ETFs and DApps emerge, the reflexive volatility peaks characteristic of earlier cycles have been subdued.

Market Capacity: With a market cap of $2.3 trillion (still 40% below the all-time high), the capital flow required to move the market is far higher than five years ago.

As volatility compresses, the core selling point of crypto for retail—“excessive volatility” that defined the 2021-2022 cycle and attracted a generation of retail investors—diminishes. For retail investors seeking volatility, stocks are becoming increasingly attractive.

Technical Factors:

Beyond structural changes in the crypto market itself, some technical factors are accelerating this shift, though they are rarely discussed.

Easier Crypto Access—Fintech companies and traditional broker platforms are integrating crypto trading (or native crypto platforms are adding stock trading), which lowers entry barriers. But the deeper impact lies in capital outflows. Previously, cumbersome deposit processes meant funds once invested in crypto could be “locked in” and naturally circulated among tokens. Now, seamless deposit and withdrawal channels enable free movement of funds between stocks and crypto, removing major obstacles.

Information Advantage—Retail investors seem increasingly attracted to stocks partly because they leverage AI to gain an unprecedented “analytical advantage.” Large language models (LLMs) significantly enhance retail investors’ analytical capabilities, giving them a sense of competing on equal footing with institutions.

This feeling does not exist in the crypto market. While data-driven analysis of cryptocurrencies is feasible, the market lacks a consensus valuation framework, token valuation mechanisms are unclear, and the universe of investable assets continues to expand. These factors make it difficult for retail investors to feel they have “gained an edge.”

Conclusion:

Retail investors—once the most reliable self-reinforcing demand source for crypto—are increasingly finding their risk appetite satisfied elsewhere.

The stock market offers increasingly competitive volatility, growing analytical advantages, and seamless switching from crypto via existing retail apps.

Cryptocurrencies still occupy a place in retail portfolios, but they are now just one of many options, no longer the primary arena for speculation.

This shift should reshape how investors view the markets. Some traditional indicators have already become ineffective. For crypto investors, simply identifying leading risk appetite indicators and combining them with native crypto frameworks is no longer enough to succeed. Investors need to increasingly adopt a cross-asset portfolio perspective, similar to practices in equities and fixed income.