Retail investors losing interest in digital currency, research finds

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Retail investor interest in digital currency is far from where it was in 2017—which is good and bad. It’s good because only individuals who are genuinely interested in blockchain development and real utility are being attracted to the digital asset ecosystem. But it’s bad because the lack of retail investor interest has made blockchain and digital currency a relatively niche sector where the same money tends to change hands rather than new money entering.

Recent research from The Block looked at several metrics that indicate what retail investors’ attitudes are towards digital currency. These metrics include Google searches, social media account activity, as well as trading volume.

Internet searches are down

Google searches for the word “Bitcoin” are down by roughly 10x from their all-time-high in December 2017. On a similar note, Wikipedia views for the “Bitcoin” page are 31 times lower than they were at their peak in the first week of December 2017.

Why?

In 2017, an abundance of digital currency projects were active and many companies were launching their ICOs. At the time, individuals who invested in these projects during their early stages made significant sized returns on their initial investment, sometimes over 100%. The majority of the investors during the 2017-early 2018 ICO craze were retail investors.

The massive amount of money that the everyday person (retail investor) was making from digital currency was attracting other retail investors to invest in ICOs. People sat at home and were wondering why their neighbors were getting rich off of digital currency while they weren’t—they wanted skin in the game too. As a result, retail investors began to research digital currency investments and internet searches for Bitcoin reached an all-time high.

However, the vast majority of the ICO projects were value-less, their technical teams were inept when it came to accomplishing their end goal, their blockchain network/tokens were not able to scale, there was no development or business building taking place on top of these blockchains, and the blockchains had no real utility. As a result, most ICO projects are down by over 90% from their all-time highs. 

That being said, individuals stopped spreading the word about the ICOs they invested in and searches for cryptocurrency investments tapered off, as a byproduct, searches for Bitcoin dwindled.

Now, only individuals who know the real utility within Bitcoin are Google searching Bitcoin to learn more about the unprecedented opportunities this technology can bring into the world. However, this group of individuals is much smaller than the group of retail investors who were throwing their money into the sector from 2017-2018.

Exchange interest lags on Twitter

Twitter followers of digital currency exchanges are growing at a far lower rate than they were in 2018. In January 2018, exchanges gained about 254,000 new Twitter followers per week on average, but in 2020, that number has declined to about 5,340 per week—about 50x less than in January 2018.

In early 2018, many retail investors were using digital currency exchanges to buy into ICOs or the hundreds of thousands of tokens that existed. But now, far fewer people are on digital currency exchanges trading, and those who are, are most likely professional investors or individuals who have been following the digital currency exchanges on Twitter long before 2020.

Trading volumes are down

Trading volumes are also significantly lower than they were in 2018. For instance, the week of December 17, 2017, the BTC/USD trading volume was around $17 billion. Whereas in 2020 the average weekly trade volume for BTC/USD is around $2.5 billion. 

However, the BTC/USD trading pair’s poor performance is not surprising, it makes sense that fewer people are interested in trading BTC because BTC has no utility. More and more people realize this every day and liquidate their BTC positions without ever re-entering BTC. 

Outside the scope of BTC, there was a lot more retail money in the digital currency space being invested into ICOs in 2017 and early 2018. Therefore, digital currency and fiat trading pairs had much higher trading volumes in 2017-2018 than they do today.

When will retail investors return?

Retail investor interest is not as plentiful as it was in 2017 and 2018, there are fewer ways for investors to “get rich quick” which has weeded out a majority of retail investors. For retail investors to get back into the space, there will need to be a popular consumer-facing app that individuals use that has been built on Bitcoin. Or the incentives for businesses to integrate the Bitcoin blockchain into their business operations will need to be strikingly beneficial, or maybe, a repeat of 2017 takes place, where prices get so outrageously high, it will be hard for retail investors to hold back while their neighbors make a multiple of their initial investment while they sleep.