A crypto trader in Abu Dhabi named Jad Fawaz says, “I’m almost out of money.” “I’m laughing because there’s no point in being sad and angry about it anymore.”
The 45-year-old quit his job in real estate a year ago to focus on trading. In the past few months, all of his holdings have gone away. Because of the stress, he hasn’t slept in a week.
“I had about 40 coins, then I had 20, then I had 10, then I had 5, and now I only have bitcoin and ripple XRP,” he says.
“Okay, these are the last two coins, and I won’t sell them until I die.”
Many small traders and investors can’t take any more.
Bitfinex, a crypto exchange, said that Bitcoin balances on crypto exchanges, where most retail investors trade, have dropped to around 2.3 million from their all-time high of 3.1 million in 2020. Self-custody wallet balances haven’t grown at the same rate, which suggests that people are selling more than they are storing, the report said.
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Analysts at Bitfinex said there are signs that a lot of small investors have given up on crypto to the point where they are leaving it altogether.
Fawaz is not alone, though.
This year has been terrible for investors. Bitcoin’s price has dropped by 63%, and the total value of all cryptocurrencies on the market has gone down by $1.63 trillion.
The market took a big hit when Sam Bankman-FTX Fried’s exchange went down.
According to data from Glassnode, investors had to get out of long-term bitcoin positions in November, which led to a 7-day realised loss of $10.16 billion. This is the fourth-largest loss in history by this measure.
“This is no longer winter; it’s a bloodbath,” said Linda Obi, a crypto investor in the Nigerian city of Lagos who works at blockchain company Zenith Chain. “The FTX crisis was like a domino that brought down so many companies,” she said.
The 38-year-old woman said she was a “long-term” investor with a five-year investment horizon and traded “a little bit of everything,” including altcoins and memecoins.
“I’m going to be very honest: I do think there’s a lot of hype around crypto, with influencer marketing and your favourite celebrities talking about it,” she said.
“People don’t do their homework and just jump in, which should change.” “We’ve started having serious talks about how we can actually clean and market the space.”
David versus Goliath
It’s nothing new for retail investors in crypto to lose money. A study done by the Bank for International Settlements (BIS) between 2015 and 2022 found that 73% to 81% of people who put money into cryptocurrencies probably lost money.
As hedge funds and other investors with more money and more experience got into crypto as the asset class grew, retail trading got harder and harder.
“It’s hard to trade on the news because we don’t know what’s going on behind the scenes.” “A tweet can change everything,” said Adalberto Rodrigues, 34, who runs a software company and also trades crypto.
Researchers from the BIS looked at blockchain data and found that the biggest bitcoin holders often sold while smaller players bought, “making a profit at the expense of the smaller users.”
Eloisa Marchesoni, a trader who said she couldn’t withdraw the $2,000 she had in FTX, is sure that crypto will still be appealing to small investors.
Related: Bitcoin investors lost $10 billion in a week, which is the fourth-worst loss ever.
Marchesoni, who lives near Tulum on the coast of Mexico’s Yucatan Peninsula, said, “Retail will eat it up, like it always does.”
Still, Charley Cooper, head of communications at blockchain technology company R3, said that the big money investors lost when FTX failed could get regulators to act.
“It’s much harder for politicians to ignore calls from people who lost their savings or money for groceries than from high-flying crypto hedge funds.”