Cryptoverse: Forget the crypto winter, this is a Bitcoin ‘bloodbath’
“I’m almost bankrupt,” says Jad Fawaz, a crypto trader in Abu Dhabi. “I’m laughing because there’s no point in pouring out more depression and more frustration about it.”
The 45-year-old, who quit his real estate job a year ago to focus on trading, has seen his holdings evaporate in recent months. He hasn’t slept in a week from stress.
“I had about 40 coins and then I got to 20 coins, then I got to 10 coins, got to five coins and now I’m down to the last two coins and it’s Bitcoin and Ripple XRP,” he says.
“So these are the last two coins and I will die before I sell them.”
For many retailers and investors, enough is enough.
Bitcoin balances on crypto exchanges — where retail investors typically transact — have fallen to around 2.3 million from an all-time high of 3.1 million in 2020, exchange Bitfinex said. Balances in self-custodial wallets have not been growing at the same pace, suggesting more is being sold than is being stored, she added.
“There are signs that a significant number of retail investors have been discouraged from exiting crypto entirely,” Bitfinex analysts said.
In fact, Fawaz is not alone.
It’s been a brutal year for investors. The price of Bitcoin has fallen by 63%, while the total cryptocurrency market cap has lost $1.63 trillion in value.
The collapse of Sam Bankman-Fried’s FTX exchange drove a long nail into the market.
November saw a 7-day realized loss of $10.16 billion in Bitcoin investments as investors were forced to exit long positions, the fourth-largest loss recorded after the measure, according to Glassnode data .
“This is no longer the winter season, this is a bloodbath because the FTX crisis was like a domino that brought down so many companies,” said Linda Obi, a crypto investor based in the Nigerian city of Lagos who is on the blockchain -Company Zenith Chain works.
The 38-year-old said she’s a “long-distance” investor with a five-year investment horizon and has traded “a bit of everything,” including altcoins and memecoins.
“I’ll be completely honest, I think there’s a whole 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 to have serious conversations about actually sanitizing and promoting the space.”
DAVID VS GOLIATH
Crypto retail investors losing money are nothing new. A Bank for International Settlements (BIS) study conducted between 2015 and 2022 estimates that 73% to 81% are likely to have lost money on their cryptocurrency investments.
Retail trading has become increasingly difficult as the asset class has grown as more cash-rich, sophisticated investors such as hedge funds have entered crypto.
“It’s really difficult to trade news because we don’t have inside information, one tweet can change everything,” said Lisbon-based Adalberto Rodrigues, 34, who also trades crypto in addition to running a software company.
BIS researchers said blockchain data analysis revealed that the largest Bitcoin holders often sold while smaller players bought “to earn a return at the expense of the smaller users.”
Eloisa Marchesoni, a trader who said she has about $2,000 in FTX that she cannot withdraw, is confident that crypto will retain its appeal for smaller investors.
“Retail, as always, is going to suck it up,” said Marchesoni, who departs near Tulum on the coast of Mexico’s Yucatan Peninsula.
Still, the steep investor losses from the FTX collapse could serve to nudge regulators into action, said Charley Cooper, chief communications officer at blockchain tech firm R3.
“Politicians have a much harder time ignoring calls from voters who have lost their life savings or food money than they do from high-flying crypto hedge funds.”