Most Retail Bitcoin Investors Lost Money in the Last Seven Years: BIS Report
- The Bank for International Settlements (BIS) stated that retail Bitcoin investors lost a significant amount of wealth in the last seven years.
- The collapse of Terra ecosystem and FTX in 2022 caused a spike in crypto trading volumes on exchanges.
- Whales sold their BTC bags while retail investors tried to increase their crypto exposure and bought more Bitcoin.
- BIS analyzed investments of retail investors in a seven-year period and concluded that by December 2022, investors lost half of their investments in BTC.
The world’s biggest cryptocurrency, Bitcoin (BTC), has moved up almost 38,000% in the last 10 years and investing in the crypto asset has made many millionaires. The crypto market bull run of 2021 saw an increase in the inflow of capital into the digital currency as many institutions began holding BTC on their balance sheets. However, a recent report from the Bank for International Settlements (BIS), an international financial institution owned by central banks, pointed out that the majority of retail investors have lost money in BTC.
According to the report from BIS, the collapse of the Terra ecosystem in 2022, along with many crypto companies, caused a spike in retail crypto trading as large investors sold their assets at the expense of smaller investors, who aimed to diversify their portfolio and expand their exposure to crypto assets following the 2021 crypto market bull run. Interestingly, the price of Bitcoin dropped from around $48k to $15k, the lowest price of BTC in over two years.
The BIS added that “these patterns highlight the need for better investor protection in the crypto space.” Interestingly, the Swiss-based bank for central bankers has called for global cooperation for the regulation of crypto assets in the past and warned against increased exposure to the global financial system.
“Options include banning specific crypto activities, containing crypto, regulating the sector or a combination of these. Containment may prevent risks in crypto from spilling over to the real economy and traditional financial system,” the report states. “The appropriate mix of measures will be needed to promote market integrity, investor protection and financial stability.”
Furthermore, it is crucial to note that the BIS analyzed the Bitcoin investments of retail investors in a seven-year period and concluded that by December 2022, a majority of these investors lost close to half of their investments in BTC. This data has been concluded after a thorough investigation of on-chain data along with crypto exchange app activity and downloads from August 2015 to mid-December 2022 in 95 countries.
The BIS report added that between August 2015 and November 2021, when bitcoin’s price peaked at $69,000, the global average daily active users spiked from 100,000 to more than 30 million.
“However, most global investors have probably lost money on their crypto investments. These losses could be exacerbated by the fact that larger, more sophisticated investors tended to sell their coins right before steep price declines, while smaller investors were still buying,” added the report.
The above statement confirms that there is a significant amount of internal trading and manipulation of the crypto market taking place. Interestingly, after the collapse of FTX and Tether, the price of Bitcoin dropped, but the trading volume on exchanges spiked. The BIS concludes that users were trying to “weather the storm by adjusting their portfolios away from owning tokens under stress and towards other cryptoassets, including asset-backed stablecoins.”
Additionally, BIS is working with central banks for the development of central bank digital currencies, or CBDCs. As reported by Bitnation, BIS initiated “Project Icebreaker” via which the BIS Innovation Hub’s Nordic Center assessed essential features and the technological viability of integrating domestic CBDC systems.