investing in cryptocurrencies by institutional versus retail investors: what’s the difference?

Cryptocurrency investment attracts various types of investors with numerous intentions. The primary kind of investors is known as institutional and retail investors. Both Institutional and retail investors have similar roles in investing in cryptocurrencies. But apart from these similarities, there are several differences between them in specific areas. 

This article will detail institutional and retail investors and examine the distinction between both investors.

Who Are Institutional Investors?

Institutional investors are companies or funds run by individuals that invest in the crypto market on behalf of others. These are the big investors with significant finances to deploy into the market. They include investment banks, hedge funds, mutual funds, pension funds, crypto exchanges, money managers, and market makers. Due to the relatively low market cap (compared to other markets), institutional investors also tend to significantly influence the crypto market because of their large capital base.

Moreover, institutional investors are also considered the most sophisticated because of their vast market knowledge. They can therefore make informed decisions regarding their investment. Because they have significant influence over the cryptocurrency market, any decision they make can either cause a decline or increase in the overall crypto market.

Who Are Retail Investors?

Retail investors, on the other hand, are usually non-professional individuals who purchase and sell cryptocurrencies and other investments (Options, Derivatives, NFT’s) through crypto exchanges or brokers. This kind of investor invests in cryptocurrencies for personal interests and or advantage. They are their own money manager which commonly results In smaller amounts of capital to invest. However, personal intentions primarily drive these investors and other life events such as retirement plans, asset buying, or education savings.

Retail investors are protected by the Securities and Exchange Commission (SEC) when investing in the financial market because of their limited exposure, resources, and sometimes experience. As a result, they are subject to behavioral or life-hazardous issues, thereby exposing themselves to additional volatility. 

The protection involves restrictions on placing trades in risky, unproven or emerging asset classes. In addition, these investors often pay very high commissions and other additional fees when investing in crypto and stocks because of their little purchasing power compared to institutional investors. 

Differences Between Institutional and Retail Investors

Although the aim of institutional and retail investors is the same as they seek to maximize their investment, there are several differences between them. Here are some crucial differences between institutional and retail investors:

  • Ownership of funds for investment: institutional investors do not own the funds they invest; they mostly trade with the capital of organizations and individuals. While retail investors are owners of the capital they use to invest in cryptocurrency.
  • The number of trades: Traditionally, institutional investors had the edge over retail investors regarding the number of trades placed daily, hourly, and even down to the second due to the resources and tools they had available, such as an auto trading bot. However, thanks to developers and coders  (mainly in the cryptocurrency sector), this technology has been streamlined to where even the newest traders can leverage it. 

Not only do these institutions rely on technology to facilitate their trades, but they also have many (sometimes hundreds) of traders placing trades on these programs simultaneously. They also work closely with over-the-counter trading desks (OTC) or directly with the brokers instead of always having to access them via a website or application.

  •  The volume of trades: Retail investors usually trade in smaller amounts (compared to institutional investors) because they are limited to their own capital. In comparison, institutional investors trade in large volumes because of their large capital base. This can be the difference between a retail trader investing $1M, versus a hedge fund trading with hundreds of millions, and in some cases, billions of dollars, if not more. 
  • Fees: Institutional investors are advantaged to pay lower fees per trade because they trade regularly, directly with a trading desk, or OTC – over the counter. In contrast, retail investors pay higher fees per trade because their trades are not substantial. 
  • Access to information: retail investors do their research for information and use general information available to all traders. Institutional investors are experts and professionals who work with professionals who perform adequate and detailed analysis, making use of information that’s usually limited to affluent investors. 
  • Education background: Retail investors do not necessarily need academic credentials to understand or perform trades. While institutional investors are degree holders in finance or finance-related courses, some even possess professional certifications.
  • Trading Impact: Because of the small volume of trades retail investors perform, their impact on the market is small. In comparison, institutional investors affect the market significantly because of their large positions. 
  • Emotional trading: this is not an issue for institutional investors because of their vast experience in investment and financial markets. Also, their qualifications and tendency to leverage software to assist in their trading plays a significant role. Retail investors are mainly subject to this because they lack market experience, education and resources. 


Aside from all the listed differences between institutional and retail investors, there’s actually a narrow line separating the two. For example, a retail investor could become an institutional investor if they start a crypto firm or fund, where they place crypto trades on behalf of others. And an institutional investor can become a retail investor if they one day decide to use their personal capital to invest for themselves. 

Although retail and institutional investors have similar risks in investing in crypto, institutional investors have less risk because their investments are diversified, and well regulated by software. Regardless, both types of investors have their benefits. Wherever they may find themselves (retail or institutional), an intelligent investor will harness that benefit to outperform the crypto market.


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