Retail investors buy crypto-linked stocks amid market collapse

• Retail investors have snapped up crypto-linked stocks and ETFs during the latest plunge triggered by FTX’s collapse.
• Net buying of the long-positioned ProShares Bitcoin Strategy ETF and the ProShares Short Bitcoin Strategy ETF increased on Tuesday.
• Bitcoin fell to a 52-week low below $17,000 on Wednesday.

Retail investors are snapping up crypto-linked stocks that are being hammered during the plunge in cryptocurrency prices centered on the liquidity crisis surrounding FTX, according to researchers at Vanda.

“Retail buys dip again,” the firm said of shares in crypto-related companies and exchange-traded funds in a note published Wednesday. The company’s VandaTrack tool monitors retail activity in more than 9,000 US-traded stocks and ETFs.

“If we were to take a poll on how retail investors feel about the recent crypto drama between Binance … and FTX.com, and what it could mean for the future of crypto, we would see an almost even result,” Marco Iachini, senior vice president for research, at Vantaa, wrote.

He said net purchases by retail investors of the long ProShares Bitcoin Strategy ETF and the ProShares Short Bitcoin Strategy ETF increased by a similar amount on Tuesday, at $1.4 million and $1.1 million, respectively.

“It’s too early to say whether this situation will develop into another Terra Luna/Three Arrows Capital moment, but it certainly calls for urgency on the regulatory front,” Iachini said. He was referring to this year’s implosion of Three Arrows Capital from its exposure to failed stablecoin Terra.

The value of the global crypto market fell 15% during Wednesday’s session to $842 billion, according to Coinmarketcap, as crypto exchange FTX appeared on the brink of collapse. Bitcoin sank to a 52-week low on Wednesday, hitting $16,997.90. Among the shares of cryptocurrency companies active among retail investors, crypto trading platform Coinbase fell 8.5%, Robinhood fell almost 10%, and Block lost more than 7%.

FTX reached out to Binance for help amid a “significant liquidity crisis,” Binance CEO and co-founder Changpeng Zhao said on Tuesday. But a bailout buyout of FTX by Binance may fall through, Coindesk reported on Wednesday.

Binance is highly unlikely to move forward with the non-binding agreement after reviewing FTX’s internal data and loan commitments, the report said, citing a person familiar with the matter.

For his part, Binance’s Zhao doesn’t see the takeover of FTX as a “win for us,” according to news reports of a memo to Binance employees.

“Regulators will scrutinize the exchanges even more. Licenses worldwide will be harder to get,” he said.