Institutions are taking over the crypto market: Is this the end of decentralization or the beginning of a new cycle?

Author: Centreless

Original Title: Is Institution-Led Crypto Market the End of Decentralization or the Beginning of a New Era?

In 2025, the cryptocurrency market will reach a structural turning point: institutional investors have become the absolute main force, while retail investors have clearly cooled off. Aishwary Gupta, Global Head of Payments and Real World Assets at Polygon Labs, recently pointed out in an interview that institutional funds now account for about 95% of overall crypto inflows, with retail investors making up only 5%-6%. The market’s leadership has changed significantly.

He explained that the shift by institutions is not driven by sentiment, but is a natural result of maturing infrastructure. Asset management giants such as BlackRock, Apollo, and Hamilton Lane are allocating 1%-2% of their investment portfolios to digital assets, accelerating their layout through ETFs and on-chain tokenized products. Gupta cited Polygon’s cooperation cases as examples, including JPMorgan testing DeFi transactions under the supervision of the Monetary Authority of Singapore, Ondo’s tokenized treasury project, and regulated staking by AMINA Bank, all of which show that public chains can now meet the compliance and audit needs of traditional finance.

The two main drivers for institutional entry are yield demand and operational efficiency. The first stage focuses on obtaining stable returns through tokenized treasuries and bank-grade staking; the second stage 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, the exit of retail investors is mainly due to losses and loss of trust 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 concerns that institutional participation will weaken the decentralization concept of cryptocurrencies, Gupta believes that as long as the infrastructure remains open, institutional participation will not centralize blockchains but will instead enhance their legitimacy. He pointed out that the future financial network will be an integrated system where DeFi, NFT, treasuries, ETFs, and other types of assets coexist on the same public chain.

As for whether institutional dominance will stifle innovation, he admitted that some experiments will be limited in a more compliance-focused environment, but in the long run, this will help the industry build a more robust and scalable innovation path, rather than relying on “breaking the rules” for rapid trial and error.

Looking ahead, he said institutional liquidity will continue to improve market stability, volatility will decrease as speculative activity drops, and RWA tokenization and institutional-grade staking networks will develop rapidly. Interoperability will also become key, as institutions need infrastructure that enables seamless asset transfers across chains and rollups.

Gupta emphasized that institutional entry is not a “takeover” of crypto by traditional finance, but a process of jointly building new financial infrastructure. Cryptocurrencies are gradually evolving from speculative assets into the core underlying technology of the global financial system.