Retail investors' presence in the crypto market has weakened sharply.

Cryptopolitan, a blockchain media outlet, reported on Wednesday that recent bitcoin deposit flows into Binance have shifted toward whales and large holders, while retail inflows are nearing record lows.

CryptoQuant analyst Darkfrost presented deposit flows of under 1 BTC as a gauge of retail participation. The figure is near an all-time low. As bitcoin hovered around $60,000, market sentiment weakened, and retail investors were cited as no longer expecting big gains or sharp rallies.

Retail inflows into Binance have fallen sharply in this cycle. Darkfrost pointed to retail investors sending an average of 329 BTC a day to Binance. That is a steep drop from the peak of 4,900 BTC a day in May 2021. He saw the recent crypto trading cycle as effectively unfolding without retail participation.

Spot bitcoin exchange-traded funds (ETFs) were also cited as a factor behind retail investor departures. With ETFs allowing exposure to bitcoin without the burden of self-custody, demand for sending funds directly to exchanges may have fallen. The market also sees retail investors waiting for a stronger uptrend signal to avoid becoming exit liquidity for whales.

Retail funds have not disappeared entirely. Money has moved to other asset classes. Binance has built more than $1 billion in assets under management in its tokenised stock trading programme, and retail investors were also shown to have shifted to precious metals and South Korea's recently rising KOSPI index. Eroding trust in memecoins, venture-capital-backed tokens and established altcoins was described as leading to a preference for traditional assets.

The market also shows a gap in views between whales and retail investors. On the whale-versus-retail delta indicator, large holders are currently more optimistic than retail investors. The market sees whales as a leading indicator that may have more information and conviction. It was also suggested that retail investors could follow if a new crypto narrative forms and liquidity returns to decentralised finance and exchanges.

Some exceptions have emerged despite depressed retail sentiment. Influencer token ANSEM, launched recently, reached a market capitalisation of $100 million. It showed the meme market can revive in a day if sufficient incentives emerge. For now it remains closer to an exceptional case, but it is seen as a sign that retail investors have not left crypto entirely. Attention is ultimately focused on when an improved sentiment signal will emerge that could bring retail funds back to exchanges and major tokens, the outlet reported.