The crypto industry has lost more than $650 billion after two major scandals in 2022
A recent report by the Bank for International Settlements (BIS) revealed that the cryptocurrency industry has lost more than $650 billion after two major scandals rocked the market last year.
The report, titled “Retail Shocks and Losses,” explained the behavior of trading investors during and after the scandals, their profits and losses, and the effects of the crypto market disruption on the broader financial system.
Retail Investors Bought The Bottom Last year the cryptocurrency space saw a lot of horrific incidents that forced several companies into bankruptcy ; More than $1.8 billion was wiped from the market in the aftermath.
One such event is the $40 billion Terra-Luna ecosystem collapse in May. According to the Bank for International Settlements ; More than $450 billion disappeared from the market after the crash.
About six months later, the world’s third largest crypto exchange, FTX, collapsed; Removing more than $200 billion from the market.
BIS also found that daily user activity has grown on cryptocurrency trading platforms in the past year as investors have tried to adjust their investment portfolios. They tried to stay away from the tokens that were under pressure.
While the whales and major investors sold their properties ; Mid-cap owners and retail investors have increased their currency positions by buying the bottom. According to the Bank for International Settlements, the whales “may have spent money at the expense of owners of young whales.”
Limited impact on the broader financial system Furthermore, the report revealed a weak correlation between cryptocurrency losses and the broader financial system. The BIS suggested that the cryptocurrency scandals have limited impact on the broader financial sector due to the current level of cryptocurrency adoption.
While retail and institutional investors posted huge losses on their crypto investments, the traditional financial system remained unscathed.
Our analysis also indicates that the sharp decline in the size of the crypto sector has not had ramifications for the broader financial system yet. However, if cryptocurrencies are more intertwined with the real economy and the traditional financial system ; The overall impact of the shock in the crypto world could have been much greater, the bank said.
Crypto Horizon
Source
