The Bank for International Settlements said in a report released on Monday that investors outside of major economies took the biggest hit, even though the majority of cryptocurrency app users worldwide lost money on their bitcoin holdings after the collapses of the Terra ecosystem and the FTX exchange last year.
Money lost in dangerous trades isn’t precisely a recent occurrence: US investors lost $9 trillion last year as a result of just decreasing stock prices. The research said that after Terra’s demise in May 2022 and FTX’s bankruptcy in November, a combined total of more than $450 billion and $200 billion, respectively, disappeared from the cryptocurrency market.
63 central banks, which represent nations that collectively account for nearly 95% of the global GDP, own the BIS. 95 countries’ worth of data from cryptocurrency trading apps and on-chain information on the daily distribution of bitcoin holdings obtained from IntoTheBlock were both analyzed by BIS. According to the data, when the price of bitcoin rose above $20,000 between August 2015 and December 2022, nearly three-quarters of people downloaded a cryptocurrency platform app.
By December 2022, the average investor would have lost $431, or over half of the $900 they had initially placed in the app. Furthermore, in certain emerging market economies including Brazil, India, Pakistan, Thailand, and Turkey, this share is considerably greater. Almost four fifths of customers would have lost money if investors kept making monthly investments, claimed the research.
The report’s authors made the assumptions that users bought $100 worth of bitcoin “in the month of the first app download and in each following month” and “on the same day they downloaded the app.” It’s not apparent to what extent these presumptions correspond to reality, especially whether downloading an app guarantees the purchase of cryptocurrency.
Larger investors may have profited at the price of smaller ones, according to the research. Prior to the sharp price decrease, the pricing patterns show that larger investors were able to sell their assets to smaller ones, it stated.
Since the market crash, regulators, who had previously been more worried about how cryptocurrency would affect financial stability, have changed their focus to establishing greater protections for retail investors.
According to the BIS paper, Data implies that crypto shocks have a limited influence on equity prices or broader financial conditions.
