A recent report from the Bank for International Settlements (BIS) revealed that the crypto industry lost more than $650 billion following two major scandals that rocked markets last year.
The report, titled "Crypto Shock and Retail Losses," explains investors' trading behavior during and after the scandal, their profits and losses, and the impact of the crypto market turmoil on the broader financial system. Last year saw a number of horrific events in the crypto space, forcing several companies out of business and wiping over $1.8 billion off the market in the aftermath.
One such event was the collapse of the $40 billion Terra-Luna ecosystem in May. According to the Bank for International Settlements, more than $450 billion was wiped off the market after the crash.
About six months later, FTX, the world's third-largest cryptocurrency exchange, collapsed, wiping more than $200 billion off the market. The BIS also found that daily user activity on cryptocurrency trading platforms increased in the last year as investors attempted to adjust their portfolios. They are trying to get rid of coins that are under pressure.
While whales and large investors dumped their Bitcoin holdings, mid-sized holders and retail investors added to their Bitcoin positions by buying on dips. According to the BIS, whales “could cash out at the expense of smaller holders.”
Additionally, the report revealed a weak correlation between crypto losses and the broader financial system. The BIS said that due to the current level of crypto adoption, the impact of the crypto scandal on the wider financial sector is limited.
While individual and institutional investors have suffered huge losses in their cryptocurrency investments, the traditional financial system has remained unscathed.
