The cryptocurrency market’s first decade had its fair share of ups and downs. There was a lot of growth as well as high levels of FUD which was expected considering that it was a new market and nobody knew whether it would last. Despite Bitcoin’s decentralized approach, the high volatility yielded a lot of concerns that it would all come crashing down eventually. The first major crash in early 2018 seemed to seal the fate of the crypto market.

Fast forward to 2021 and the crypto market managed to not only survive the attacks from regulators and the traditional financial industry, but thrived and achieved new all-time highs. An influx of institutional buyers was one of the main reasons for this year’s strong bullish run. This is because institutional involvement brought in a huge amount of money into the market and also provided more confidence that the crypto market is here to stay.

Bitcoin Institutional involvement is turning out to be a double-edged sword

When Tesla and Grayscale started buying Bitcoin, it led to a wave of retail buying which in turn led to a positive feedback loop that triggered even more buying which fueled the massive bull run earlier this year. It also explains the huge expectations that BTC would continue on its upward trajectory and even trade above $100,000.

Unfortunately, a continued bull run is not sustainable without some market corrections along the way. It is this kind of thinking that encouraged whales and other institutions to take advantage of market shorting opportunities which provided excellent opportunities to make some more gains while cryptocurrency prices were on the decline. An unfair situation for buyers who got in near the top.

The Wyckoff manipulation that has been taking place in the market is the result of institutions and whales manipulating the market. They are responsible for the market’s high volatility levels. For instance, when they dump their crypto holdings, prices fall by big margins. This leads to the liquidation of overleveraged accounts betting on prices to go up, which in turn causes prices to crash harder.

Then, they buy back at price levels that allow them to make some more gains without triggering disinterest by retail buyers. This is not the only downside of the institutional influx in the crypto market. They have a larger scope of influence thanks to deep pockets, which means they can influence the market’s direction.

The regulatory attempts

Institutions are also the main reason for the regulatory pressure that is currently weighing heavily on the crypto market. Many cryptocurrencies are decentralized, which means they cannot be controlled by a central authority as is the case with fiat currencies. However, centralized exchanges act as a bridge through which governments and financial institutions can push their agenda.

It looks like old money also wants a piece of the crypto pie but only if there is more regulation on cryptocurrencies. Such a push may steer Bitcoin and the overall crypto market towards an unnatural direction and is equivalent to losing the plot. The main reason why cryptocurrencies exist is so that the people can take back control over their money. Traditional financial institutions are responsible for the poor state of the fiat financial system and their involvement in crypto may undermine the freedom that cryptocurrencies offer.

DeFi to the rescue

Fortunately, the crypto market seems to be a step ahead of the attempts to impose control over the crypto market. Decentralized finance ecosystems allow people to fully exercise control over their money without central authorities.

Governments are currently working towards CBDCs through which they can retain centralized control over the financial markets and it explains the recent criticism on stablecoins such as USDT. Fortunately, there are decentralized stablecoins such as DAI and UST which crypto holders can use to avoid government influence. Unfortunately, institutions will likely continue to influence the market despite DeFi’s rapid growth and the future remains uncertain.