The Battle Between Retail Investors and Wall Street in 2025: The Struggle for Market Dominance

The financial market in 2025 is a battlefield, where retail investors, leveraging the coordination of social media and speculative enthusiasm, engage in fierce clashes with Wall Street giants that possess vast capital and shrewd strategies. This dynamic is particularly evident in the game between Bitcoin and the so-called "death line," the overbought rebound of the S&P 500 index, and the speculative frenzy of options and crypto assets, raising a key question: who will prevail in this range-bound battle? This article explores the struggle between retail investors and Wall Street, the significance of key resistance levels for Bitcoin, and the broader implications for stocks, commodities, and crypto assets in 2025, based on the latest market data, technical analysis, and macro trends.

The Retail Investor Rebellion: An Unignorable Force

Retail investors have become a formidable force, driving unprecedented market activity. In the options market, retail investors account for two-thirds of the daily options trading volume on the S&P 500 index, with 70% of the options being call options, a bullish sentiment not seen since the meme stock frenzy of 2021. This speculative craze is reminiscent of the short squeeze events involving GameStop and AMC, where retail investors coordinated actions through platforms like X and Reddit, defeating hedge funds and causing significant losses for short sellers. In the crypto assets market, the Tom Mlen oscillation indicator shows that unreported traders (retail investors) hold a substantial net long position in micro Bitcoin futures, pushing prices close to the critical "death line" resistance level, which triggered an 80% retracement in 2017 and 2021.

The power of the retail investor lies in its ability to create momentum-driven short squeezes. For example, the price of Bitcoin soared to a historical high of $122,946 in December 2024, driven by retail enthusiasm and the influx of $1.9 billion from institutional ETFs in January 2025, far exceeding the 13,850 BTC mined that month. The demand driven by retail investors, combined with corporate adoption (for instance, MicroStrategy holding 450,000 BTC worth $45 billion), suggests that a structural shift could overwhelm Wall Street's bearish bets.

However, the enthusiasm of retail investors is accompanied by risks. The overbought condition, such as the RSI divergence of Bitcoin and the disconnection of the S&P 500 index from its 20-day moving average, indicates that the market may be experiencing fatigue. According to Glassnode data, retail investors often buy at high points and panic sell during pullbacks, making them susceptible to tactical withdrawals from Wall Street.

Wall Street's Counterattack: The Power of Patience and Capital

Hedge funds and Commodity Trading Advisors (CTAs) on Wall Street are playing a different game. Their net short positions on the Russell 2000 Index and Bitcoin (according to Subu Trade) reflect a contrarian bet on mean reversion. The net position of large speculators as a percentage of open contracts is "extremely negative" on the Russell 2000, and this pattern historically tends to predict a rebound. Similarly, hedge funds' short bets on Bitcoin are expected to lead to a collapse similar to past events, with Peter Schiff warning that if the Nasdaq enters a bear market, Bitcoin could drop to $65,000.

Wall Street's strategic advantage is reflected in dark pool trading, with $4 billion in SPY block trades indicating that institutions are repositioning. Ray Dalio's recent filings show that he has sold his S&P 500 index holdings in favor of gold and Chinese stocks (such as BABA), indicating a shift towards defensive assets amid tariff concerns and rising volatility. The VIX (market fear gauge) has surged to its highest level since December 2024, indicating that Wall Street is preparing for a more turbulent market.

However, Wall Street's short positions also face risks. If Bitcoin breaks the "death line" (around $120,000-$125,000, based on the 2025 peak), short covering could trigger a "continuous pump" market, driving prices further up. The S&P 500 Index recorded the third-fastest recovery, rising 20% in 2024, while the Nasdaq hit a new high in July 2025 (driven by NVIDIA's $4 trillion valuation), indicating that momentum may challenge bearish bets. Wall Street's need for a lower entry point may force CTAs to buy in an uptrend, as cash levels are below Bank of America's sell signal.

Death Line: Bitcoin's Moment of Success or Failure

The "death line" of Bitcoin is the key to the battle between retail investors and Wall Street. This technical resistance level was touched in 2017 and 2021, leading to over 80% corrections. In 2025, Bitcoin reached this level (peak of $122,946) but faced a slight rejection, with low trading volume indicating caution. However, several factors suggest a possible breakthrough:

• Corporate Adoption: Over 130 companies, including MicroStrategy and possibly Trump Media, are using Bitcoin as a reserve asset, while Japan's Metaplanet plans to increase its 10,000 BTC reserves fivefold. Institutional purchases combined with retail investor enthusiasm have created a supply-demand imbalance, with BTC absorbed by ETFs far exceeding mining output.
• Political Tailwind: The Trump administration's supportive stance on Crypto Assets, including the proposed U.S. strategic Bitcoin reserve and the White House Crypto Assets summit, has boosted market sentiment. However, Trump's tariff policy triggered volatility, causing Bitcoin to drop 17% to $78,103 in February 2025 due to trade concerns.
• On-chain Dynamics: Glassnode data shows that the accumulation patterns of large holders (greater than 10,000 BTC), medium traders, and retail investors are consistent with a breakout period. The decline in exchange balances further indicates supply tightness.

Breaking through the "death line" could see Bitcoin's target price reach $150,000 to $200,000, as predicted by Max Keiser and Chamath Palihapitiya, driven by a hard cap of 21 million coins and ETF demand. Conversely, if this level is not breached, combined with macro headwinds (such as the Fed's hawkish rate cuts and a correlation of 0.88 with Nasdaq), a pullback to $65,000 to $80,000 could occur, as Schiff warned.

Market Correlation and Earnings Season

The interaction between stocks, commodities, and Crypto Assets highlights a broader struggle. The S&P 500 and Nasdaq reached record highs in July 2025, in an Overbought state, with only 11% of similar situations remaining bullish three days later, according to Subu Trade. Earnings season kicks off with Tesla and Google, with market expectations at peak perfection, and Goldman Sachs reports bullish sentiment at unprecedented levels. However, the "buy the expectation, sell the fact" pattern (e.g., Netflix) and Google's low forward P/E ratio (23) amidst performance concerns related to artificial intelligence and geopolitical risks indicate volatility.

In terms of commodities, gold and silver are breaking through, with a target price of $4,000 for gold and $42-43 for silver, reflecting defensive positioning. The rare earth minerals needed for artificial intelligence hardware are expected to spark a boom in the next decade as countries compete for supply. China's liquidity injection has boosted stocks like Yinn CQ, indicating a rotation of funds towards emerging markets.

Viewpoint: The Outcome in 2025

Retail investors have the upper hand in short-term momentum, especially in the crypto assets space, where their coordinated buying and institutional support could break through the "death line," triggering a short squeeze against Wall Street bears. However, Wall Street's capital, dark pool operations, and ability to respond to volatility give it an advantage during long-term pullbacks. The overbought condition of the S&P 500 and the surge in VIX indicate that a short-term pullback may coincide with Bitcoin's failure at the resistance level if macro pressures (such as tariffs, Federal Reserve policies) intensify.

To ensure that retail investors "win," continuous coordination and trading volume are crucial, especially when breaking through key technical levels. Wall Street relies on mean reversion and volatility spikes, using cash reserves to buy on dips. My view leans towards 2025 being a year of extreme volatility, where retail investors will achieve tactical victories (such as crypto assets short squeezes), but unless a black swan event occurs (such as large-scale ETF inflows or regulatory shifts), Wall Street's strategic depth will prevail. Investors should remain flexible and pay attention to Bitcoin's $120,000-$125,000 levels, S&P 6,350 call options, and earnings report catalysts for directional clues.

In summary, 2025 is a high-risk game. The enthusiasm of retail investors meets the pragmatism of Wall Street; although the "death line" is crucial, the outcome depends on trading volume, macro stability, and who gives in first.