The era of explosive gains in the cryptocurrency market may be drawing to a close, according to Galaxy Digital CEO Mike Novogratz. Speaking at the CNBC Digital Finance Forum in New York on Tuesday, Novogratz suggested that the influx of risk-averse institutional investors is reshaping the crypto landscape, displacing the retail traders who once fueled rapid price surges.

Novogratz pointed to the collapse of FTX in 2022 as a watershed moment, leading to a "breakdown in trust" and a subsequent bear market that saw Bitcoin plummet 78% from $69,000 to $15,700. He also highlighted the October 10 leverage flush that year, which "wiped out a lot of retail and market makers," further contributing to selling pressure. "Crypto is all about narratives, it's about stories," Novogratz stated, emphasizing the time it takes to rebuild confidence after such setbacks.

This shift doesn't necessarily signal the end of crypto, but rather a transition from high-return speculation to more practical applications, such as tokenized real-world assets offering steadier returns. Novogratz envisions a future where crypto rails are used to bring banking and financial services to a global audience, dealing with real-world assets and consequently, lower returns.

Echoing this sentiment, Chainlink co-founder Sergey Nazarov also suggested that tokenized real-world assets would surpass traditional speculation. This evolving landscape reflects a growing maturity in the crypto industry, where institutional players with different risk tolerances are becoming increasingly dominant. Retail traders, who typically seek outsized returns, are gradually being replaced by whales with substantial balance sheets, seeking different investment opportunities.

The crypto market is currently experiencing extreme fear, with the Fear & Greed Index hitting levels not seen since the FTX collapse, signaling mass deleveraging and panic-driven volatility. Bitcoin has fallen considerably from its peak in October. This correction is shaking out leveraged retail and short-term holders.

Despite the current downturn, some analysts maintain a bullish outlook, citing factors such as a pro-Bitcoin U.S. President, the adoption of spot Bitcoin ETFs, and growing corporate treasury participation. They argue that the institutional adoption, built on real-world utility, is the real path to mass adoption and price discovery.

While the market navigates short-term institutionalization and lower returns, the long-term potential remains significant. Galaxy Digital, for instance, is launching a $100 million hedge fund with a substantial allocation to crypto, signaling that strong holders are accumulating assets during the downturn, positioning themselves for a more mature market.

However, veteran investor Michael Burry remains skeptical, warning that Bitcoin remains largely speculative and has yet to prove itself as a reliable hedge during times of market stress. He argues that there is no organic use case to slow or halt the current spiral, and that its price movements are purely speculative and vulnerable to negative market sentiment.