A crypto bull market is perhaps one of the most wildly exciting and most risky things in the financial world today. It’s characterized by crazy volatility and huge price gains in short periods of time. A market where one right decision can make up for over 10 bad trades.

However, if you ask what truly drives these explosive growth phases, the responses may vary. Some might say it’s a flood of retail money chasing the next big thing, but others might say institutional capital steers the ship. Understanding what constitutes a crypto bull market requires a deep dive into both retail and institutional drivers and how they have historically influenced different market cycles.

Retail Money: The Fuel for FOMO and Innovation

Retail investors have often been the heartbeat of crypto bull markets, driving prices to meteoric heights as they pour money into the newest trends, technologies, and narratives. History has shown that when retail enthusiasm takes hold, entire sectors within the crypto economy can experience massive growth spurts.

For instance, the 2017 ICO (Initial Coin Offering) craze marked a period where retail money flooded into new projects promising to revolutionize various industries using blockchain technology. The allure of getting in early on the next Bitcoin (BTC) or Ethereum (ETH) led to billions of dollars being raised through ICOs, driving a euphoric bull market. Projects like Ethereum itself gained massive traction as the platform of choice for launching these ICOs, which in turn, fueled ETH’s price appreciation.

A look at Ethereum’s chart from back then will show you how explosive the growth of ETH was during the ICO days. It was truly the birth of both the second largest cryptocurrency as well as an entire ecosystem that still surrounds it to this day. The chart below is in log scale, to better show the explosive growth. Fast forward to the DeFi (Decentralized Finance) summer of 2020, and we witnessed another retail-driven wave. As traditional finance came under scrutiny during the pandemic, DeFi projects like Aave (AAVE), Uniswap (UNI), and Compound (COMP) offered retail investors an alternative way to earn yields, borrow, and lend without intermediaries. This sparked a new bull run centered around DeFi protocols, which saw unprecedented growth in both adoption and token valuations.

In the 2021 bull market, alternative layer-1 blockchains like Solana (SOL) and Avalanche (AVAX),captured retail interest as Ethereum’s network became congested and expensive to use.

These alternative blockchains offered faster and cheaper transactions, sparking a rotation of capital into their ecosystems. The retail narrative shifted towards finding “Ethereum killers,” leading to massive gains for early adopters of these alternative chains. Just look at the chart of SOL to see how fast the right cryptocurrency can catch fire when retail money pours into the market.

Looking ahead, the next bull market could see retail money flowing into AI coins and memecoins. AI coins are emerging as potential winners if retail investors gravitate towards the newest use cases in artificial intelligence. Meanwhile, memecoins continue to offer the thrill of high-risk, high-reward speculation, akin to a slot machine in a crypto casino. These long-shot bets can produce huge wins, further fueling retail FOMO (fear of missing out) and driving market cycles.

Institutional Money: The Steady Hand of the Market

While retail investors bring energy and volatility, institutional money often provides the backbone of a sustained bull market. In the past, institutional players primarily entered the crypto space through venture capital (VC) investments and through the Grayscale Trusts. These VC funds would invest in early-stage projects, providing the necessary capital for development while also expecting significant returns as these projects matured and their tokens appreciated in value.

During previous bull markets, institutional money would flow from VC investments into more liquid assets like Bitcoin and Ethereum. From there, capital would often trickle down into smaller altcoins, creating a cascading effect of rising prices across the market. This cycle of money moving from large-cap assets to mid and small-cap altcoins, and eventually being recycled back into Bitcoin, has been a hallmark of previous bull markets.

However, the landscape is shifting. With the introduction of spot Bitcoin and Ethereum ETFs, institutional money now has a more direct and regulated entry point into the market.

Unlike VC investments, which are relatively illiquid and involve significant risk, ETFs offer institutions a safer and more straightforward way to gain exposure to cryptocurrencies. However, the downside is that the money locked into these ETFs is siloed, and doesn’t flow as easily into other areas of the crypto economy. This could alter the traditional market cycle, as money locked in ETFs might not flow as freely into smaller altcoins as it once did through VC channels.

The presence of ETFs might lead to a more Bitcoin and Ethereum-centric bull market, where these two assets drive the majority of capital inflows, leaving less liquidity for altcoins. On the flip side, the increased legitimacy and accessibility that ETFs bring to the market could attract a new wave of institutional capital that eventually trickles down to other sectors within the crypto economy.

Retail vs. Institutional: The Balance of Power

A crypto bull market is often the result of a delicate balance between retail enthusiasm and institutional investment. Retail money brings in the FOMO and speculative fervor, driving prices of emerging trends like ICOs, DeFi, alternative layer-1s, and potentially AI coins and memecoins. Meanwhile, institutional money provides the steady, long-term capital that supports market stability and broader adoption.

As the crypto market continues to mature, the interplay between these two forces will shape the nature of future bull markets. The introduction of spot crypto ETFs marks a significant shift in how institutional capital enters the space, potentially leading to more stable but perhaps less explosive market cycles. However, as long as retail investors continue to chase the next big thing, we can expect to see new sectors within the crypto economy rise and fall, driving the excitement and volatility that define the crypto bull market experience.

Editor’s Note: Cryptocurrency has been the best returning asset class of the last decade and is know for its parabolic bull markets. It is also a key to a truly diversified portfolio and one of the best hedges against the potential risks that lie ahead in markets. But you need to act now before institutions gobble it all up.

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This article previously appeared on Investing Daily.