What You Need to Know:
- Retail investors have largely stayed away from the recent Bitcoin rally, showing significantly lower interest compared to 2021.
- Although Bitcoin has achieved an all-time high, traders are proceeding with caution, reflected in lower funding rates and a rise in short positions.
- The current market sentiment points towards a shift towards sustainable trading practices, which could lead to long-term gains.
What happens when retail investors withdraw from the crypto scene while institutional players gain more traction? Examining Bitcoin’s recent all-time high, it’s easy to conclude the market feels bullish and that the industry is evolving.
That may be true; however, we are not fully there yet. So before celebrating with a new Lamborghini, let’s delve deeper.
Retail investors have virtually ghosted this rally. A quick look on Google Trends for the term “Bitcoin” reveals a stark contrast to the surge experienced during the 2021 bull market. Back then, Bitcoin was trending everywhere, capturing the attention of everyone, including casual investors. In 2025? It seems retail interest has dwindled.
There was a brief spike in retail interest surrounding the recent U.S. presidential election, coinciding with a fleeting memecoin craze. However, that surge quickly disappeared, even as Bitcoin soared past $111,000 this week.
Bitcoin search interest over time on Google
Bitcoin search interest over time on Google. (Google Trends)
“At the start of this cycle, memecoins became the focal point of high-risk trading driven by retail investors, peaking in January,” noted FRNT Financial, a crypto platform based in Toronto. “However, there’s been a significant drop-off in interest and trading activity for memecoins since then, reflecting a cautious risk appetite currently in the cryptocurrency market,” they added.
Translation: The “Wen Lambo” crowd has seen the risks and isn’t rushing back into the market in droves.
Risk Appetite Revisited
Returning to our earlier car analogy, let’s revisit risk appetite. During the 2021 bull market, investors were excitedly purchasing high-performance cars, stripping for speed without regard for potential risks. All that mattered were speculative gains.
Fast forward to now—having faced substantial losses, traders today are opting for reliable vehicles, like Toyota Corollas—practical and steady, rather than risky sports cars.
Moreover, this risk-averse sentiment is evident from the funding rates, as noted in FRNT’s analysis of Bitcoin perpetual rates—an indicator of traders’ willingness to maintain long positions. When Bitcoin peaked near $42,000 in January 2021, the perpetual rate soared as high as 185%. Now, with Bitcoin hovering near $110,000, that rate has plummeted to around 20% on prominent crypto options exchange Deribit, indicating a drastically different risk appetite compared to the 2021 highs.
Average daily BTC perp rate from 2021 to 2025
Average daily BTC perp rate from 2021 to 2025. (Deribit/FRNT)
Short Position Dynamics
Additionally, the prevailing high ratio of short positions is noteworthy. As reported by CoinDesk’s Oliver Knight, the Bitcoin long/short ratio is at its lowest since the severe crypto downcycle in September 2022. This statistic suggests traders are skeptical about the current positive momentum, betting instead that Bitcoin may decline amid the bullish rally.
Bitcoin long/short ratio
Bitcoin long/short ratio. (Coinalyze/TradingView)
The effects were clearly visible when Bitcoin tumbled from approximately $111,000 to $108,000 in mere minutes, only to rebound to $109,000 shortly after. This volatility showcases the current anxiety among investors.
In this light, investors are still taking their flashy, modified performance cars for joyrides on weekends, but they also keep their reliable Corollas in tow—just in case things take a quick turn.
Reason for Optimism?
With the existing macroeconomic risks, it’s understandable that investors remain defensive. However, this caution might actually be what signals a sustainable rally in the crypto market.
“Periods characterized by low leverage and risk appetite in cryptocurrencies have often preceded sustainable gains,” remarked FRNT.
“Bitcoin appears to be in such a phase, backed by several bullish catalysts and narratives,” they concluded.
In summary, while retail investors may have stepped back from the race, institutional money is stepping into the arena with sturdy, tried-and-true investments. This approach might herald a methodical march towards the moon, as opposed to a reckless spree.
