Bitcoin (BTC-USD) prices have sured on hopes the Securities and Exchange Commission will approve a spot bitcoin ETF. But, according to Bernstein Global Digital Assets Managing Director and Senior Analyst Gautam Chhugani, there's one thing that has made this rally different.

Retail traders have been a big driver of the crypto market. As Chhugani points out, crypto-related bankruptcies and the collapse of FTX “directly hurt” investor confidence, primarily retail investor confidence, since institutions weren't playing a big role. But that has changed. In this cycle, institutions are in the driver seat, according to Chhugani. "Institutions have always been laggards in any crypto... bull market. This time, actually, institutions have led the market," Chhugani argues, pointing to large firms like BlackRock filing for spot bitcoin ETF applications.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

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Editor's note: This article was written by Eyek Ntekim

Video Transcript

- Thinking about the role that retail plays in the crypto market overall, what have you seen from those investors in the last few months? How do you expect those investors to play a role in the market in 2024? Because it felt, at least to me-- and maybe I'm wrong on this-- it felt like late '22, early '23, that bid, that enthusiasm from retail really came out of the crypto market. And it feels like it's come back in a big way just in the last few weeks.

GAUTAM CHHUGANI: Yeah, for sure. So I think when an event like FTX happens, and obviously, you saw many other bankruptcies with Celsius and Voyager, that directly hurt investor confidence, particularly retail investor confidence because those were the ones that were mostly invested. Obviously, institutions didn't play that big a role in the last cycle. I think what's changed in this cycle versus any other previous cycle, institutions have always been laggards in any crypto market, any crypto bull market.

This time, actually, institutions have led the market, right? So the first news that came in June was the BlackRock filing of the Bitcoin ETF. And that was a big signal that went out to everyone else. And obviously, multiple other ETF applications followed, first with Bitcoin and then with Ethereum later in the year. So I think those two signals were very strong from an institutional standpoint. And even within for us at Bernstein, we've seen this play out where the overall retail sentiment was weak through 2023.

But when it came to large institutional clients, we were seeing that interest come back. So it's a different market, it's a different cycle. I think retail wanted that confidence. And now that institutions are leading it, now retail can come out in full force and feel confident about it. And this time, they don't have to worry about custody and safety, which has obviously been one of the biggest challenges of crypto.