The Bank for International Settlements published a paper saying half of small crypto investors lost money last year. But in poorer countries like India, Turkey and Pakistan, it was 80%.
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A new study suggests that poor investors in emerging economies were hit harder by crypto price crashes caused by the collapse of FTX and the UST stablecoin.
While half of the small investors lost money by December, in emerging countries like India and Turkey, 80% lost funds.
A paper published by the Bank for International Settlements, which is no fan of crypto, found that small individual investors were hit harder by these failures than large sophisticated investors. Which is hardly shocking.
Among other things, small investors doubled down on Bitcoin after these events — essentially following the "buy the dip" strategy — while the big investors dumped shortly before the big price falls. It said:
"The price patterns suggest that larger investors were able to sell their assets to smaller ones before the steep price decline."
The BIS study made a number of broad assumptions about buying strategies of smaller investors — notably that small investors bought $100 worth of BTC shortly after downloading a crypto exchange app, and continued doing so every month.
Using those numbers, the study's authors found that, since August 2015, a median investor lost $431 of an assumed $900 investment by December 2022. But it added:
"This share is even higher in several emerging market economies like Brazil, India, Pakistan, Thailand and Turkey. If investors continued to invest at a monthly frequency, over four-fifths of users would have lost money."
Which is to say 80% of investors in those countries have lost money on crypto investments, by the study's estimates.
That is noteworthy given that crypto buyers in emerging economies have been buying as much to protect themselves against fiat currency devaluations due to inflation as much as a long-term investment strategy.
So even with crypto's crashes it can be better than keeping their money in local currencies. Turkey, for instance, saw inflation of 58% in January, after spiking as high as 85% in October.
