Is institutional dominance of the crypto market the end of decentralization or the beginning of a new era?

Author: Centreless

In 2025, the cryptocurrency market will experience a structural turning point: institutional investors become the dominant force, while retail investors significantly cool off. Aishwary Gupta, Head of Global Payments and Physical Assets at Polygon Labs, recently stated in an interview that institutional funds now account for about 95% of total crypto inflows, with retail investors making up only 5%-6%, marking a significant shift in market dominance.

He explained that the shift by institutions is not emotion-driven but a natural result of matured infrastructure. Including asset management giants such as BlackRock, Apollo, and Hamilton Lane, they are allocating 1%-2% of their portfolios to digital assets, accelerating deployment through ETFs and on-chain tokenized products. Gupta cited examples of Polygon collaborations, including JPMorgan testing DeFi trading under Singapore’s MAS regulation, Ondo’s tokenized government bond project, and regulated staking by AMINA Bank, all demonstrating 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 tokenized government bonds and bank-grade staking; the second phase is driven by efficiency improvements brought by blockchain, such as faster settlement speeds, shared liquidity, and programmable assets, prompting large financial institutions to experiment with on-chain fund structures and settlement models.

In contrast, retail investors’ withdrawal mainly stems from losses and trust erosion caused by the previous Meme coin cycle. However, Gupta emphasized that this is not a permanent loss. As more regulated and transparent risk products emerge, retail investors will gradually return.

Regarding external concerns that institutional entry might weaken the decentralization concept of cryptocurrencies, Gupta believes that as long as the infrastructure remains open, institutional participation will not centralize the blockchain—in fact, it will enhance its legitimacy. He pointed out that future financial networks will be a融合体系 where DeFi, NFTs, government bonds, ETFs, and other asset classes coexist on the same public chain.

On whether institutional dominance will suppress innovation, he admits that in a more compliance-focused environment, some experiments may be limited. However, in the long run, this will help the industry build more robust and scalable innovation pathways, rather than relying on “breaking rules” style rapid trial and error.

Looking ahead, he states that institutional liquidity will continue to enhance market stability. After reducing speculative activities, volatility will decline, and RWA tokenization along with institutional-grade staking networks will develop rapidly. Interoperability will also become key—institutions will need infrastructure that enables seamless cross-chain and cross-layer asset transfers.

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.