Retail crypto investors in emerging economies hit hardest by FTX, Terra collapses: BIS
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While most crypto app users worldwide lost money on their bitcoin holdings after last year’s collapse of the Terra ecosystem and FTX exchange, investors outside major economies took the biggest hit, the Bank for International Settlements said in a report published Monday.
Losing money on risky investments isn’t exactly a new phenomenon: Last year, US investors lost $9 trillion due to falling stock prices alone. More than $450 billion disappeared from the crypto market after the collapse of Terra in May 2022, and another $200 billion was lost after FTX’s bankruptcy in November, the report said.
BIS, an institution owned by central banks, analyzed data from crypto exchange apps for 95 countries and chain data on the daily distribution of bitcoin holdings collected from IntoTheBlock. The data showed that from August 2015 to December 2022, nearly three-quarters of users downloaded a crypto platform app when the price of bitcoin was above $20,000.
“The median investor would have lost $431 by December 2022, equivalent to nearly half of their total $900 in funds invested since downloading the app. Notably, this proportion is even higher in several emerging market economies such as Brazil, India, Pakistan, Thailand and Turkey If investors continued to invest at a monthly frequency, over four-fifths of users would have lost money, the report said.
The authors of the report assumed that users invested in bitcoin “on the same day they downloaded the app” and that “each new user purchased $100 bitcoin a month for the first app download and in each subsequent month.” It is unclear how much these assumptions reflect reality – especially if downloading an app ensures the purchase of crypto.
The report also said that larger investors may have profited at the expense of smaller ones. “The price patterns suggest that larger investors were able to sell their holdings for less before the sharp price decline,” it said.
After the market collapse, regulators who were previously more concerned about crypto’s impact on financial stability have moved to set up stronger protections for retail investors.
“Evidence suggests that crypto shocks have a limited impact on stock prices or broader economic conditions,” the BIS report said.
Read more: FTX collapse brings total crypto market cap below $800 billion, near 2022 low
