By: Centreless
In 2025, the cryptocurrency market reached a structural turning point: institutional investors became the absolute dominant force, while retail investors notably cooled off. Aishwary Gupta, Global Head of Payments and Real World Assets at Polygon Labs, recently pointed out in an interview that institutional capital now accounts for approximately 95% of overall cryptocurrency inflows, with the retail proportion dwindling to only 5%-6%, marking a significant shift in market dominance.
He explained that the institutional shift is not driven by sentiment but is a natural outcome of maturing infrastructure. Asset management giants, including BlackRock, Apollo, and Hamilton Lane, are allocating 1%-2% of their portfolios to digital assets, accelerating their deployment through ETFs and on-chain tokenized products. Citing Polygon's collaboration cases as examples, such as JPMorgan testing DeFi trading under the supervision of the Monetary Authority of Singapore, Ondo's tokenized treasury project, and AMINA Bank's regulated staking, Gupta noted that public blockchains are now capable of meeting the 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 methods like tokenized treasuries and bank-grade staking; the second phase is propelled by efficiency gains brought by blockchain, such as faster settlement speeds, shared liquidity, and programmable assets, which are prompting large financial institutions to experiment with on-chain fund structures and settlement models.
In contrast, the exit of retail investors is mainly due to losses and a loss of trust caused by the previous meme coin cycle. However, Gupta emphasized this is not a permanent outflow; as more regulated and transparent risk products emerge, retail investors will gradually return.
Addressing external concerns that institutional entry might weaken cryptocurrency's decentralization ethos, Gupta believes that as long as the infrastructure remains open, institutional participation will not centralize the blockchain but will instead enhance its legitimacy. He pointed out that the future financial network will be a converged system where various assets like DeFi, NFTs, treasuries, and ETFs coexist on the same public chain.
Regarding whether institutional dominance might stifle innovation, he acknowledged that some experimentation would be constrained in a more compliance-focused environment. However, in the long run, this will help the industry build a more robust and scalable path for innovation, rather than relying on high-speed trial-and-error through "rule-breaking."
Looking ahead, he stated that institutional liquidity will continue to enhance market stability, with volatility decreasing as speculative activities lessen. RWA tokenization and institutional-grade staking networks will develop rapidly. Interoperability will also become crucial, as institutions require infrastructure capable of seamlessly transferring assets across chains and across rollup layers.
Gupta emphasized that institutional entry is not a "takeover" of crypto by traditional finance, but a process of jointly building new financial infrastructure. Cryptocurrency is gradually evolving from a speculative asset into a core underlying technology of the global financial system.
