The poor performance of the largest cryptocurrency by market capitalization Bitcoin (BTC) has allegedly impacted a large number of retail investors and caused huge financial losses. A report from the analysis made by the Bank for International Settlements (BIS) on February 20, revealed how retail investors use the cryptocurrency exchange apps and almost all of the investors lose money on BTC.
According to the report which surveyed investors’ activity for approximately seven years (2015-2021) the median retail investors lost almost half of their Bitcoin holdings by December 2022. This applies to nearly all economies in the sample space. Meanwhile, in the wake of the crisis the crypto industry is currently facing, crypto trading activity has improved significantly as prominent investors have resolved to sell while smaller retail investors have also resolved to buy.
Although many investors recorded significant losses in the period under review, the report suggests that the losses did not impact the broader financial markets conditions as much. This is for sure reflective of the self-referential nature of crypto as an asset class.
The rise in Bitcoin Price Attracts New Investors
Recall that in November last year, BIS released a report that showed that retail customers are attracted to the crypto industry by the rising price of BTC and not by their animosity toward other financial institutions, especially banks. The documents also revealed that a rise in the price of Bitcoin is associated with a significant increase in new users i.e entry of new investors.
Finally, the international financial organization said several other regulators shared options for regulators to ensure the stability of the financial system and prevent risks associated with crypto from becoming systemic. The report suggests banning certain crypto activities, containing crypto, and regulating the industry. Notably, the right blend of these measures will positively impact market integrity and investor protection and also guarantee financial stability.
However, last month, Tesla, the electric vehicle and clean energy company opted to hold its remaining Bitcoin in 2022 despite the turmoil in the crypto market. The decision by the company came after it sold about 75% of its cryptocurrency holdings in July 2022.
