Forget crypto winter, this is a bitcoin ‘bloodbath’
Bitcoin trader Jad Fawaz says there is no point in furthering frustration and depression over a cryptocurrency crash as he laughs at being “almost bankrupt”.
Important points:
- Bitcoin balances on crypto exchanges have fallen to around 2.3 million from a peak of 3.1 million
- Overall, the cryptocurrency market cap has dropped $1.63 trillion in value
- The collapse of Sam Bankman-Fried’s FTX hammered a long nail into the market
The 45-year-old from Abu Dhabi – 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 due to 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 said .
“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 units from a 2020 all-time high of 3.1 million, exchange Bitfinex said.
Wallet balances have not grown at the same pace, indicating more sales than storage.
“There are signs that a significant number of retail investors have been discouraged to the point of abandoning crypto altogether,” Bitfinex analysts said.
Mr Fawaz is not alone. It’s been a brutal year for investors.
Bitcoin’s price has fallen 63 percent, 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 seven-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.
The 38-year-old – who works at blockchain firm Zenith Chain – said she was a “long-range” 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 percent to 81 percent of investors 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 very difficult to trade on news because we don’t have inside information, one tweet can change everything,” said Lisbon-based Adalberto Rodrigues, 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 on FTX that she was unable to withdraw – is confident that crypto will retain its appeal to 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] lost their savings or grocery money than from high-flying crypto hedge funds.”
Reuters
