Crypto's Social Risk: Why Retail Investors Haven't Returned to 2021 Levels
The crypto market often feels like a frenzy, with calls for "alt season" echoing across social media whenever prices tick up. It can seem like everyone is piling back in, reminiscent of the explosive growth seen in 2021. However, perception and reality can diverge significantly. By analyzing a metric called "Social Risk," we can see that broad retail interest hasn't truly returned to the levels seen in the previous cycle – at least, not yet.
What is Social Risk?
Social Risk is a composite metric designed to quantify social interest in the cryptocurrency space. It acts as a barometer for retail engagement, combining five key data points:
YouTube Subscribers: Growth in subscribers to prominent crypto-focused YouTube channels.
YouTube Views: Daily views across these same channels.
Analyst Followers on X: Follower growth for key crypto analysts on X.
Exchange Followers on X: Follower growth for major cryptocurrency exchanges on X.
Layer 1 Followers on X: Follower growth for foundational blockchain projects (Layer 1s) on X.
When aggregated, these metrics create the Social Risk index. Historically, peaks in this index have coincided with market tops. In the 2017-2018 cycle, Social Risk surpassed 0.8 near the peak. In 2021, fueled by pandemic lockdowns and unprecedented monetary stimulus, it surged above 0.9, indicating massive mainstream attention.
The Social Risk Index (Orange Line) showing historical peaks in 2017-18 and 2021 compared to current levels. this chart is from intothecryptoverse.com
This Cycle vs. Last Cycle: A Tale of Two Realities
Despite recent price appreciation, particularly in Bitcoin, the Social Risk index tells a different story for this cycle. It has remained significantly lower, never approaching the heights of 2021. Currently hovering around a meager 0.009, it suggests that the broad retail enthusiasm seen previously is largely absent.
Applying a moving average to smooth the data reveals a striking similarity: the current market phase strongly resembles 2019. During that period, retail interest saw a partial recovery after the 2018 crash but never reached the fever pitch that would later characterize 2020 and 2021.
The Social Risk Index (Orange Line) (30-day SMA). this chart is from intothecryptoverse.com
The Monetary Policy Connection
Why does this cycle look more like 2019 than 2021? The most compelling answer lies in monetary policy.
2019 & Current Cycle: Characterized by relatively tighter monetary conditions. In 2019, the Federal Reserve implemented only three rate cuts. Similarly, this cycle has seen limited easing thus far. Crucially, both periods involved Quantitative Tightening (QT), where the central bank reduces its balance sheet, effectively pulling liquidity from the market.
2020-2021: Marked by extremely loose monetary policy. Aggressive rate cuts and massive Quantitative Easing (QE) flooded the system with liquidity, coinciding with stimulus checks, creating fertile ground for speculative asset growth and high social engagement in crypto.
While some might point to the Fed cutting rates by 100 basis points this cycle compared to 75 basis points before the 2019 recovery, the context is different. The starting point, or "terminal rate," was much higher this cycle (around 5.50%) compared to the last (around 2.50%). Proportionally, the 75 basis point cut from 2.50% was a more significant easing measure than the 100 basis point cut from 5.50%. To achieve an equivalent proportional easing this cycle would require approximately 165 basis points of cuts – meaning we'd potentially need another 65 basis points (two to three standard cuts) to match the 2019 pre-rally conditions.
This tighter monetary environment helps explain why broad market participation, especially in altcoins, has remained subdued.
Altcoins and the Advanced Decline Index
Further evidence comes from the Advanced Decline Index (ADI) of the top 100 cryptocurrencies. This metric tracks the number of assets rising versus falling within that group. Since November 2021, the ADI has been in a consistent downtrend, indicating that most altcoins have been underperforming or "bleeding" against Bitcoin. This pattern mirrors 2019, where the ADI also trended downwards until after significant rate cuts occurred and QT ended, paving the way for QE. The strong uptrend in the ADI seen in late 2020 and 2021 simply hasn't materialized this cycle because the necessary monetary policy shift hasn't happened.
The Advanced Decline Index (ADI) for the Top 100 Cryptocurrencies, illustrating the persistent downtrend since late 2021 (red line). this chart is from intothecryptoverse.com
Social Risk Tracks Altcoins, Not Just Bitcoin
An interesting observation is that Social Risk correlates more closely with the altcoin market often proxied by Ethereum's performance than with Bitcoin alone. While Bitcoin has achieved new highs, Social Risk has remained low. This is because widespread retail excitement – the kind that drives huge social engagement – is often fueled by the potential for explosive gains in smaller altcoins.
When altcoins underperform, as they largely have against Bitcoin for years, general interest wanes. Bitcoin's rise alone, while significant, hasn't been enough to reignite the broad-based mania captured by the Social Risk metric. In 2019, when Bitcoin rallied but altcoins lagged, Social Risk only reached the 0.3-0.4 level, similar to the peaks seen so far this cycle.
A Deeper Look at Engagement Metrics
Examining the individual components of Social Risk confirms the lack of sustained retail return:
YouTube Views: While occasional spikes to around 2 million daily views occur (often coinciding with volatility), they quickly fade. Current averages hover near 700,000 views/day, a far cry from the sustained 2-3 million daily views (peaking at 4 million) seen in 2021.
YouTube Subscribers: Spikes this cycle have reached ~20,000 new collective subscribers per day, compared to sustained periods above that level and peaks of 40,000-60,000 in 2021.
X (Twitter) Followers (Analysts & Exchanges): Current follower growth pales in comparison to 2021. Occasional daily spikes reach ~20,000 new followers for analysts, whereas 2021 saw peaks over 100,000 and a sustained base level often exceeding 25,000. Exchange follower growth shows a similar disparity. The "area under the curve" for follower growth is vastly smaller now.
Layer 1 Followers on X: This metric also shows significantly lower growth compared to the last cycle's peak.
Daily Views across major crypto YouTube channels (7-day MA), and Daily new followers for crypto analysts on X. this chart is from intothecryptoverse.com
Importantly, this isn't because accounts are less active. Data shows that crypto accounts on X are tweeting as much, if not more, than they did in 2021. The engagement simply isn't translating into the same level of follower growth, likely because the underlying altcoin market isn't delivering the desired returns.
The Feedback Loop and the Path Forward
There's a clear feedback loop: Altcoins bleed against Bitcoin -> Retail investors lose interest as they primarily seek altcoin gains -> Social Risk declines -> Bitcoin Dominance increases.
Breaking this cycle likely requires a significant shift towards looser monetary policy. Historically, such shifts often follow periods of sustained market "pain." We are arguably experiencing that pain now across various market segments. Increased market stress raises the probability of central banks pivoting towards easing measures.
Conclusion: Waiting for the Catalyst
While Bitcoin's price action might suggest a roaring bull market, the Social Risk metric reveals a crucial missing ingredient: broad retail participation, particularly in altcoins. The current environment, heavily influenced by relatively tight monetary policy, mirrors 2019 more than the euphoric 2021.
Until monetary conditions ease significantly – potentially spurred by ongoing market pain – it's likely that altcoins will continue to struggle relative to Bitcoin, keeping Social Risk subdued. The "everyone is here" feeling remains largely a perception, not yet reflected in the underlying data of social engagement. The core group of crypto enthusiasts remains, but the floodgates of mainstream interest seen in 2021 have yet to reopen.
