Forget crypto winter, this is a bitcoin ‘bloodbath’
(Our weekly analysis of the wild world of cryptocurrencies)
By Medha Singh and Lisa Pauline Mattackal
Dec 6 (Reuters) – “I’m almost bankrupt,” said Jad Fawaz, a crypto trader in Abu Dhabi. “I’m laughing because there’s no point in exerting more depression and more frustration over it.”
The 45-year-old, who quit his property job a year ago to focus on trading, has seen his holdings disappear in recent months. He hasn’t slept in a week because of the stress.
“I had about 40 coins and then I got down to 20 coins, then I got down to 10 coins, got down to five coins and now I’m down to the last two coins and that’s bitcoin and ripple XRP,” he says .
“So these are the last two coins and I will die before I sell them.”
Too many retailers and investors are enough.
Bitcoin balances on crypto exchanges – where retail investors typically trade – have fallen to around 2.3 million from their 2020 all-time high of 3.1 million, exchange Bitfinex said. Self-storage wallet balances have not grown at the same pace, indicating more sales than storage, it added.
“There are signs that a significant number of retail investors have been discouraged to the point of abandoning crypto altogether,” Bitfinex analysts said.
Indeed, Fawaz is not alone.
It’s been a brutal year for investors. Bitcoin’s price has fallen 63%, while the total cryptocurrency market cap has lost $1.63 trillion in value.
The collapse of Sam Bankman-Fried’s FTX exchange hammered a long nail into the market.
November saw a 7-day realized loss of $10.16 billion in bitcoin investments as investors were forced to exit long positions, the fourth-largest loss on record by that measure, according to Glassnode data.
“This is not the winter season anymore, this is a bloodbath, because the FTX crisis was like a domino that knocked over so many companies,” said Linda Obi, a crypto investor in the Nigerian city of Lagos who works at blockchain firm Zenith Chain.
The 38-year-old said she was a “long-term” investor with an investment horizon of five years and traded “a little bit of everything,” including altcoins and memecoins.
“I’ll be very honest, I think there’s a lot of hype around crypto, with influencer marketing and your favorite celebrities talking about crypto,” she added.
“People don’t do research and just jump in, and that should change. We’ve started having serious conversations about how we can actually clean up and advertise the space.”
DAVID VS GOLIATH
Crypto retail investors losing money is nothing new. A study by the Bank of International Settlements (BIS), conducted between 2015 and 2022, estimated that 73% to 81% were likely to lose money on their cryptocurrency investments.
Retail trading has become increasingly difficult as deeper-pocketed, more sophisticated investors such as hedge funds entered crypto as the asset class grew.
“It’s really hard to trade on news because we don’t have inside information, one tweet can change everything,” said Lisbon-based Adalberto Rodrigues, 34, who trades crypto in addition to running a software firm.
BIS researchers said blockchain data analysis found that the largest holders of bitcoin often sold while smaller players bought, “providing a return at the expense of the smaller users”.
Eloisa Marchesoni, a trader who said she had about $2,000 in FTX she was unable to withdraw, is confident crypto will retain its appeal for smaller investors.
“Retail will soak it up, as always,” said Marchesoni, who heads near Tulum on the coast of Mexico’s Yucatan Peninsula.
Still, the big investor losses from the FTX collapse could serve to trigger regulators, said Charley Cooper, chief communications officer at blockchain technology firm R3.
“Politicians have a much harder time ignoring calls from constituents who have lost their savings or their grocery money than from high-flying crypto hedge funds.”
(Reporting by Lisa Pauline Mattackal and Medha Singh in Bengaluru; Editing by Pravin Char)
