After the major crypto disasters of 2022, retail trading in cryptocurrency saw a surge, according to new data from the Bank for International Settlements (BIS). Unfortunately, though, large cryptocurrency investors seem to have taken advantage of this moment by selling their assets at the cost of smaller crypto traders trying to diversify due to these crises.
The Cryptocurrency Industry Needs Investor Protection
The BIS report warns of the necessity for improved investor protection in the crypto space, ultimately calling on global cooperation when regulating digital assets and cautioning against increased exposure to the international financial system. As a resource often used by financial regulators to inform their decisions, this Swiss-based bank for central banks reinforces past statements regarding enhanced regulation in this field.
Banning certain crypto activities, containing the sector, or regulating it altogether may be necessary to prevent potential risks from reaching the real economy and traditional financial system. Finding a combination of measures that promotes market integrity, investor protection, and financial stability is essential to ensure safety for cryptocurrency investors.
After taking into consideration crypto exchange app downloads, on-chain data, and activity across 95 countries from August 2015 to mid-December 2022, a comprehensive analysis of retail investor Bitcoin returns revealed that most individuals lost half their initial investments by the end of December 2021 despite the large price hikes experienced throughout these seven years.
Large Cryptocurrency Investors Selling While Small Investors Buying Caused Losses
As the cost of Bitcoin skyrocketed to a record-breaking high of $69,000 between August 2015 and November 2021, so too did the number of global active users – rocketing from just 100,000 daily users to over 30 million.
Unfortunately, most global investors have likely incurred losses due to their cryptocurrency investments. According to the BIS report, This lamentable situation could be exacerbated by the fact that bigger and more adept cryptocurrency investors usually sold off their coins right before significant price drops while smaller traders were still buying – which might bring about additional worries concerning market manipulation and insider trading when it comes to digital assets already held by regulators.
The Number of Users Increased Even During the Great Crises
The drastic declines of Terra, Luna, and FTT tokens caused the prices of Bitcoin, Ether, and other cryptocurrencies to drop more than 20% within days. However, during these events, Binance, Coinbase, and FTX experienced a surge in daily active users as cryptocurrency investors sought to “weather the storm” by shifting from high-risk crypto assets towards safer asset-backed stablecoins. Clearly illustrating how people responded positively to this financial turmoil with savvy portfolio management decisions.
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