Most people who invest in Bitcoin inevitably lose money

Bitcoin symbol on glass plane next to HK Bitcoin ATM and two people standing in corridor in background.

Bitcoin has been around for decades, although at that time researchers at the BIS noted that the cryptocurrency was not widely used for regular transactions or real financing.
Image: PETER PARKS/AFP (Getty Images)

According to a new study by one of the world’s leading central banking institutions, nearly three-quarters of newfound bitcoin investors lost money when they put their money into the big cryptocurrency play.

A working paper A look at the world of cryptocurrencies from 2015 to 2022 from the Bank for International Settlements, released on Monday, found evidence that confirms what we all already thought: between 73 and 81% of new cryptocurrency investors inevitably lost money on their initial investment. . Most people involved in cryptocurrency came from Turkey, Singapore, Great Britain and the United States during this period.

Economists noted that “risk-seeking” young people under the age of 35 are the main segment of new bitcoin investors, according to the report. What’s more interesting is that newfound crypto investors aren’t getting into the idea of ​​crypto because of any lofty ideals of decentralized finance or a move away from big banks, but rather because they’re hoping to bankroll big returns for minimal effort after losing out on promises.

If you’re a cryptocurrency critic, this working paper will do nothing but confirm your prejudices. However, the report suggested that the user was buying bitcoins while downloading the cryptocurrency app. Economists found that 73% of users downloaded a cryptocurrency app when the price of bitcoin rose above $20,000. If, for example one user bought $100 worth of bitcoin every month for several monthsthen the median investor would have lost $431 or 48% of their $900 investment.

Again, the study focuses on two major events in recent cryptocurrency history that have helped inform their results. The paper analyzed the Chinese government’s shock to the bitcoin ecosystem began to fight with cryptocurrency In 2021, as well as unrest in Kazakhstan, caused shocks in the cryptocurrency market.

After China largely outlawed cryptocurrency mining, it forced miners to export their operations to other countries, with many moving to neighboring Kazakhstan with the promise of little regulation and cheap electricity. However, in January, rising fuel prices and outages due to the never-ending electricity demand of cryptocurrency miners led to violence and deadly riots. Information was provided by the government turn off internet services and took 15% of miners offline. Oh, but the real horror of the events of those days, at least for the bitcoin bulls, was that it was sent bitcoin prices are falling.

The miners finally got their way Places like Texas, but after both China and Kazakhstan, the report noted that there are very few people willing to accept bitcoin. The China incident caused a 39% drop in bitcoin prices and a 30% drop in new users. Kazakhstan reduced prices by 19% and new users by 15%. Other studies of bitcoin prices by researchers narrowed down the variables further, and the correlation between prices and new users appears to follow the same trajectory.

And that’s why people who hold a lot of bitcoins, the so-called “whales” or even “fearers” of cryptocurrencies, tend to sell during price increases. All the small investors flooding the markets are fodder for real bitcoin bulls to sell their shares, “allowing early investors and insiders to cash out their accounts.”

as mentioned by CointelegraphThe research is in line with other reports on Monday from sites such as Glassnode that the percentage of addresses generating revenue has hit a two-year low.

Cryptocurrencies have pushed the narrative that users are getting in quickly because crypto is some kind of “future”. This happened especially in 2021, when the price of cryptocurrency increased rapidly. Big-name actors pushed the narrative of “raising the bar” like The Superbowl ad with the tagline “fortune favors the brave.” Now, more investors are trying to withdraw their funds due to concerns about’s high reserves. mainly consists of junk coins. FTX’s ad featuring Larry David claims you don’t want to “miss out” on the future of decentralized finance, the entire exchange was trying to build support until last week. blew up.

And what about all the talk about the need to move away from the power of the big banks? Well, the economists at the Bank for International Settlements have made it pretty clear.

“Users [are] Instead of a dislike of traditional banks, a search for a store of value, or a distrust of government institutions, rising prices attract Bitcoin,” the researchers noted.

If most crypto investors were really worried about decentralization in hopes of moving up the line, there would be an even bigger pushback on Ethereum moving from a less decentralized proof of work to a fully centralized proof. Like David Gerard, author 50 Foot Blockchain Attacka last blog“Decentralization is always fake.”

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