US retail investors shifted their positions and started to speculate in cryptocurrencies again

Even as hedge funds and other large traders bet on a fall in their prices, retail investors remain committed to cryptocurrencies.

The prices of cryptocurrencies such as Bitcoin, Ethereum, and Dogecoin have rebounded from their mid-year decline in recent weeks and returned to highs not seen in months.

As of 18:09 Beijing time, Bitcoin was priced at US$46,025, the highest point since May 15, and it has risen 64% this year.

Meanwhile, Ethereum is up 344% this year, while Dogecoin is up more than 5,500% this year.

Trading volume jumps

Data shows that a sharp influx of retail investors has driven the recent trend.

At the end of July, Tesla CEO Musk stated at "The B Word" conference co-organized by the Cryptocurrency Innovation Council that he personally holds Bitcoin, Ethereum and Dogecoin, and that Tesla and SpaceX only hold Bitcoin.

That same week, Amazon made a splash by announcing it was hiring digital currency and blockchain experts.

This has, to a certain extent, made investors once again favor cryptocurrencies.

Around that time, spot trading volumes for cryptocurrencies including bitcoin and ethereum surged on major exchanges including Binance, Kraken, Coinbase Global and Gemini Trust, according to data compiled by cryptocurrency data provider Coin Metrics.

According to the Wall Street Journal, Nate Maddrey, senior research analyst at Coin Metrics, said:

Despite strong growth in trading volume from institutional investors, the majority of spot trading on exchanges is driven by individual investors.

Despite strong growth in trading volume from institutional investors, the majority of spot trading on exchanges is driven by individual investors.

In addition to cryptocurrency trading volumes, other signs of activity from retail or non-professional investors also reflect a surge in interest.

Many cryptocurrency alternatives have surged in price recently, reflecting the activity of retail investors as they seek out digital assets with smaller market capitalizations but the potential for big gains.

Cardano’s price has surged about 63% in the last month, while litecoin’s price has risen about 38% in the same period, according to CoinDesk.

Meanwhile, data from Coin Metrics shows that the number of accounts holding between 100 and 10,000 Dogecoins has begun to increase again after a slight decline earlier this year.

The overall stock market has also been experiencing a period of relative calm as retail investors’ interest in cryptocurrencies has increased. Many meme stocks that are typically favored by retail investors have also slumped in recent weeks.

GameStop, AMC and BlackBerry have fallen 10% or more in the past month.

Sentiment diverges across investor groups

Data released by the U.S. Commodity Futures Trading Commission (CFTC) on Friday afternoon showed that leveraged funds, including hedge funds, continued to be short on Bitcoin, according to a Bitcoin futures report released by the Chicago Mercantile Exchange.

Leveraged funds held 5,113 short positions in bitcoin futures, more than double the 1,995 long positions they held.

In contrast, asset managers and institutional investors hold more long positions than short positions.

The divergence in sentiment among different investment groups comes as cryptocurrencies face major headwinds, the biggest of which is a cryptocurrency provision in a U.S. infrastructure bill that aims to tighten tax enforcement procedures for cryptocurrency transactions.