In 2025, the cryptocurrency sector entered a new phase where institutional participation grew significantly. After years of caution and skepticism, major companies are now showing substantial capital in digital assets.
Why did institutions decide to turn to the sector they previously avoided? BeInCrypto spoke with Aishwary Gupta, who serves as the global head of Payments and Real-World Assets at Polygon Labs. He explained the factors behind this change. Gupta discusses why institutional investments now dominate the markets and what this change means.
Institutions now dominate crypto investments: here are the reasons.
Gupta noted that institutions currently account for approximately 95% of all crypto investments. At the same time, the share of retail investors has dropped to about 5-6 percent. This change represents a shift from previous hype-driven, consumer-led cycles to markets driven by more structural finance.
Large asset managers, such as BlackRock, Apollo, and Hamilton Lane, have begun to allocate about 1-2% of their portfolios to crypto, bringing ETF products to the market and piloting tokenized investment products operating on the blockchain.
According to Gupta, the change is not due to the mood on Wall Street, but rather the current infrastructure that enables institutional activity. He cited Polygon as an example:
“Partnerships with JPMorgan for executing live DeFi trades under the Singapore Monetary Authority, with Ondo regarding tokenized government bonds, and with AMINA Bank concerning regulated staking demonstrate that the infrastructure enabled by DeFi can also serve as a motor for international financing. Scalability and low transaction costs have sparked TradFi's interest in public blockchains. Institutions no longer have to experiment in closed environments — they can transact in vetted, Ethereum-compatible public networks that meet the requirements of auditors and regulators.”
According to Gupta, institutions are entering the crypto space from two directions. The pursuit of returns and decentralization, as well as the enhancement of operational efficiency, are key reasons. The first wave focused on dollar-denominated returns, such as tokenized government bonds and bank-managed staking products. This provided a familiar and regulated framework for generating returns.
The second wave is driven by the efficiencies brought by blockchain. Faster settlement, shared liquidity, and programmable assets have encouraged large financial networks and fintech companies to experiment with tokenized fund structures and on-chain transfers.
The withdrawal of retail investors raises questions about the direction of crypto as institutions take the lead.
The leader also emphasized the reasons behind the withdrawal of retail investors. He stated that retail investors exited the market primarily due to losses caused by meme coin cycles and unrealistic return expectations. This erosion of trust drove many small investors away. However, he does not believe that this is a permanent or structural phenomenon.
“Through more structured and regulated products, investor trust can be regained and they can be attracted back to the market,” Gupta told BeInCrypto.
However, the growth of institutional participation has raised concerns about the erosion of the principle of decentralization in crypto. According to Gupta, maturity and decentralization do not exclude each other if public, open networks remain the foundation.
According to him, decentralization is threatened only by the loss of transparency — not by the entry of new players into the network.
“When building on top of public infrastructure instead of closed environments, institutional acceptance does not centralize crypto, but rather increases its legitimacy… TradFi does not conquer crypto, but transitions on-chain — it is not a conquest but a merging of infrastructures, as the chains that host DeFi and NFTs also serve as platforms for government bonds, ETFs, and institutional staking,” he noted.
When asked whether institutional dominance could slow innovation by prioritizing regulation over experimentation, Gupta acknowledged the existence of tension. Nevertheless, he assessed that this could benefit the sector in the long run.
“The 'move fast and break things' mentality produced a lot of creativity but also led to enormous losses and regulatory issues. Yes, institutions move slowly and prioritize compliance, and yes, this may limit creativity, but if executed correctly, it does not stifle innovation. It can even promote it and compel developers to think of regulation as a way to enhance innovation by incorporating regulation from the very beginning. Progress may be slower, but it is also more sustainable and scalable,” the leader commented.
What's next, as institutions solidify their presence in crypto?
Reflecting on the future, Gupta said that the growth of institutional participation should not be interpreted as a 'conquest' of Wall Street, but rather a transition to an increasingly diverse ecosystem.
“The market now operates with institutional-level liquidity that moves more slowly, generates returns, and is stronger in risk management. No longer do retail investors dominate the market chasing hype and FOMO through centralized exchanges as they did in 2017. There is less emotional trading. Volatility decreases as capital shifts from speculation to longer-term returns. The narrative has evolved; crypto is now seen more as a financial infrastructure than an asset class,” he mentioned.
He anticipates significant growth in the tokenization of real-world assets (RWA) and a gradual strengthening of retail market stability as trading becomes more disciplined and less speculative. The alignment of regulation and traditional financial players is likely to intensify as they develop increasingly on-chain strategies.
Gupta predicts that institutional investment and yield networks will grow even further as regulated actors seek legitimate ways to participate in on-chain yields. At the same time, interoperability becomes increasingly important as public blockchain tools allow assets to move between various rollups as institutions expand their operations.
