Author: Centreless
Original Title: Institutional Dominance in the Crypto Market: The End of Decentralization or the Beginning of a New Era?
In 2025, the cryptocurrency market has reached a structural turning point: institutional investors have become the absolute main force, while retail investors have noticeably cooled off. Aishwary Gupta, Global Head of Payments and Real-World Assets at Polygon Labs, recently stated in an interview that institutional capital now accounts for approximately 95% of the total inflows into cryptocurrency, with the retail proportion dropping to just 5%-6%, indicating a significant shift in market dominance.
He explained that the shift towards institutions is not driven by sentiment, but is a natural result of maturing infrastructure. Major asset management giants, including BlackRock, Apollo, and Hamilton Lane, are allocating 1%-2% of their investment 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 transactions under the supervision of the Monetary Authority of Singapore, Ondo's tokenized treasury project, and AMINA Bank's regulated staking—Gupta demonstrated that public chains 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 driven by the efficiency improvements 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 that this is not a permanent loss; as more regulated and risk-transparent products emerge, retail investors will gradually return.
Addressing concerns that institutional entry might weaken the decentralized ethos of cryptocurrency, Gupta argued 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 fused system where DeFi, NFTs, treasuries, ETFs, and various other assets coexist on the same public chain.
Regarding whether institutional dominance might stifle innovation, he acknowledged that some experimentation would be limited 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 that "breaks the rules."
Looking ahead, he stated that institutional liquidity will continue to enhance market stability, with reduced speculation leading to lower volatility. The tokenization of real-world assets (RWA) 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.
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