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

Source: Wintermute

Author: Jasper De Maere

Translation and compilation: 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 late 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 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 team, combined with our own liquidity data, now suggest that stocks and cryptocurrencies are increasingly becoming complementary risk assets.

Key Insights

• Reversal phenomenon: Retail activity in cryptocurrencies and stocks once moved in tandem. Since late 2024, they have shown an inverse relationship: when retail investors buy stocks, their activity in crypto remains subdued, and vice versa.
• Volatility premium compression: The volatility premium of cryptocurrencies over stocks was once their biggest appeal to retail investors, but now it is structurally shrinking. Volatility is no longer a defining feature of diversified crypto investments.
• Tech-driven factors: Several underappreciated technological reasons are accelerating this shift, such as easier access to cryptocurrencies breaking the “closed audience” effect; meanwhile, LLM-driven analysis is narrowing the cognitive advantage gap in stock markets, a phenomenon not yet seen in crypto.
• Traditional indicators failing: Conventional leading indicators of crypto risk appetite (like M2 money supply) are losing their predictive power. Investors are increasingly viewing crypto through a multi-asset portfolio lens, similar to other mature asset classes.

The Reversal

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 moved in sync until late 2024. During that period, high risk appetite drove buying in both, as they both served as outlets for excess capital (see M2) and risk sentiment.

Since late 2024, this relationship has unraveled: retail investors have flooded into stocks at an unprecedented rate, while their activity in crypto has remained stagnant. The divergence between the two has now reached a historic extreme.

Looking deeper, we use the market cap of altcoins as a long-term proxy 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 largely moved together, 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 driven, volatile, and somewhat structurally lacking retail activity.

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 overlaying key catalysts, this dynamic becomes even clearer. Several points stand out:

• Meme coins and AI proxies have shined during stock market stagnation, 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.
• Post-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 overall positive relationship has now turned negative. Retail investors are making choices between the two, rather than investing in both simultaneously.

This new data also supports this conclusion. Retail activity in stocks has become a new variable, and crypto investors should monitor it closely to identify potential windows where retail funds might more persistently flow into crypto.

Volatility = Product Attribute

One reason retail remains attracted to and active in crypto is its volatility profile. Volatility is the product. It was the initial driver that drew retail into crypto.

However, although crypto’s actual volatility still far exceeds that of stocks, its structural contraction is now well underway, and this trend is unlikely to reverse in the short term. The volatility ratio between BTC and the Nasdaq (NDX) has continued to decline, even compressing below 2x in the first half of 2025.

Thoughts on key drivers:

• Market Maturity: As more institutional investors and new liquidity tools like ETFs and DATS emerge, the reflexive volatility peaks seen in earlier cycles have been smoothed out.
• Market Capacity: With a market cap of $2.3 trillion (still 40% below all-time highs), the capital required to move the market is far higher than five years ago.

As volatility compresses, the core selling point of crypto for retail diminishes. The “excess volatility” that defined the 2021-2022 cycle and attracted a generation of retail investors is no longer present. For volatility-seeking retail, stocks are becoming increasingly attractive.

Tech-Driven Factors

Beyond crypto-specific market structures, some under-discussed technological factors are accelerating this shift.

• Crypto Access: Integration of crypto trading into fintech and traditional brokerage platforms has lowered entry barriers. But more profound is its impact on “exit” options. In previous cycles, friction in depositing and withdrawing funds meant capital was locked once in crypto, fostering organic token cycles. Now, seamless on/off ramps mean funds can flow easily between crypto and stocks, with no significant barriers.
• Cognitive Iteration: Retail investors seem increasingly attracted to stocks partly because AI has unlocked new cognitive advantages. LLMs significantly enhance retail analysis capabilities, creating a sense of “fair competition.”

• This feeling is absent in crypto. While data analysis is possible, crypto lacks a consensus valuation framework and token value capture mechanisms. The expanding universe of investable assets makes it hard for retail to feel they have a cognitive edge.

Conclusion

Retail, once the most reliable self-reinforcing demand source for the crypto market, is increasingly finding its risk appetite satisfied elsewhere.

Stocks not only offer increasingly competitive volatility but also provide growing analytical advantages, and can be seamlessly accessed via apps already on retail phones, enabling easy switching from crypto to stocks.

Crypto still has a place in retail portfolios, but it is now just one of many options, no longer the primary battleground for speculation.

This shift should also reshape investors’ market perceptions. 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 view crypto through a multi-asset portfolio lens, similar to approaches in equities and fixed income.