A recent study by the Bank for International Settlements (BIS) has shown that approximately 73% to 81% of retail cryptocurrency investors have suffered losses on their initial investments, following the price declines seen by the sector over the past year.

“Overall, back of the envelope calculations suggest that around three-quarters of users have lost money on their Bitcoin investments,” noted economists at BIS in a working paper, adding that the study analysed data on crypto investors in 95 countries between 2015 to 2022. The paper also charted the rise and fall of Bitcoin’s price, which increased from US$250 in August 2015 to nearly US$69,000 in November 2021, before gradually falling back to around US$16,500 at present day.

The study also highlighted the investment behaviour between larger and smaller investors during the period studied, noting that larger holders (those who own wallets in excess of 100,000 Bitcoin) typically sold their Bitcoin as prices rose. Meanwhile, small and medium holders – defined as those with less than 1 and between 1 to 1,000 Bitcoin, respectively – tended to buy more.

BIS researchers further noted that the number of people using crypto investment apps also rose during this same period, from 119,000 to 32.5 million individuals. “Our analysis has shown that, around the world, Bitcoin price increases have been tied to greater entry by retail investors,” they shared in the study.

Additionally, about 40% of the new users were found to be made up of men under the age of 35, typically classified as “the most ‘risk-seeking’ segment of the population”. It was also found that these individuals showed a tendency to trade more actively in the months after the price of Bitcoin rose exponentially.

Finally, the BIS study highlighted the need for better consumer protection for crypto investors, especially if there is an expected growth in crypto adoption in the economy soon. “As recent developments have shown, if interest rates rise and global risk appetite suddenly wanes, the overall market could dry up. If, following price declines, retail investors make losses and exit the market, there is the potential for self-reinforcing dynamics,” BIS researchers said.

The crypto market has seen nearly US$2 trillion of its value erased thus far this year, with investors spooked by the collapse of well-known tokens and market players, one after the other within a short span of time. These include the fall of the Terra blockchain, crypto hedge fund Three Arrows Capital, crypto lender Celsius Network Ltd, and most recently, crypto exchange FTX – just to name a few.

Meanwhile, BIS – which was established in 1930 – is widely considered to be the central bank of central banks globally. It aims to assist central banks around the world in their pursuit of monetary and financial stability through international co-operation.

(Source: BIS [1, 2])

• TAGS:
• Bank for International Settlements (BIS)
• Celsius Network Ltd
• Cryptocurrency
• FTX
• Investment
• Terra Luna
• TerraUSD (UST)
• Three Arrows Capital