Cryptocurrency Market Pulled Back, Led By Declines in BTC and ETH as Retail Investors Rotated Out of Large-Caps

The cryptocurrency market pulled back over the last 24 hours, led by declines in major coins as retail investors switched out of large-cap tokens and into smaller, more speculative assets.

Cryptocurrency prices pulled back slightly over the last 24 hours, led by declines in major coins as retail investors switched out of large-cap tokens and into smaller, more speculative assets, according to an over-the-counter trader at Wintermute.

Both bitcoin and ether dropped around 2% and the CoinDesk 20 Index (CD20), a measure of the broad market, fell 2.7%.

"We’ve observed a significant week-on-week increase in retail participation, reinforcing the broader narrative of rising optimism," the trader, Jake O, said in a note on Thursday. "The shift down the risk curve is most evident in retail screen flows."

Institutional investors, for their part, have been more conservative. They're still stocking up on bitcoin, ether and XRP, while easing off positions in solana which has faced "sustained presures."

"Some are viewing SOLETH underperformance as an opportunity to position for Solana topside," Jake noted, pointing to steady buying in $200 Solana call options ahead of June and July.

Other options activity suggests traders are hedging for volatility ahead. Call spreads on ether were unwound and some traders moved into collar structures - strategies often used to protect against price swings - signaling caution after recent gains.

The growing hedging activity adds a note of caution to retail's swing to speculation. Economic uncertainty, lingering inflation pressures and U.S. tariff policy are all weighing on risk appetite in crypto as well as traditional markets.

Global asset managers, in fact, currently have their largest underweight position in the U.S. dollar in 19 years. Even though President Donald Trump secured a major investment deal with Qatar and a temporary reduction in U.S.-China tariffs, these outcomes may lead to further downside: Spanish bank Bankinter said in a note that the market has shown fatigue over the last trading session.

"We still think the damage is done: both EPS and prices should feel the strain, with rising inflationary pressures preventing the Fed from cutting rates as much as the market expects," the bank's analysts wrote. Market participants are set to now focus on producer price inflation and retail sales data, as well as on Fed Chair Jerome Powell's speech later today.

For the crypto market, a re-test of the all-time high isn't out of the picture.

"Looking ahead, we believe there is further room for digital assets to rally, especially as Coinbase's inclusion into the S&P 500 on 19 May draws closer," Singapore-based QCP Capital wrote. Stay alert!

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