According to the BIS study, an increase in Bitcoin’s value leads to more involvement from retail investors, which subsequently causes a decrease in the price when it falls.
The Swiss-based Bank of International Settlements (BIS) recently surveyed retail investors on how they use crypto exchange apps. They found that a wide majority–one third–of those surveyed have lost money in Bitcoin.
Some interesting insights come from BIS’s study that contains data on 95 countries from 2015 to2022. The majority of app downloads occurred when Bitcoin (BTC) was trading for more than $20,000.
If every retail player in the market had spent $100 on BTC each month since installing their respective app, 81% of them would have lost money.
“We show that, when the price of Bitcoin rises, more people download and actively use crypto exchange apps. These new users are disproportionately younger and male, commonly identified as the most “risk-seeking” segment of the population. We show that, due to price declines, an estimated 73-81% of retail investors have likely lost money on their initial investment”.
Therefore, BIS has evaluated the potential outcomes of a wider cryptocurrency useage both in terms of economy and customer welfare.
Curiously, BIS also observed that small-time investors are still interested in digital assets despite their well-known volatility. Furthermore, the crypto world hasn’t developed enough yet for digital assets to be used regularly as payments.
According to BIS,“Yet despite this, retail investors continue entering into crypto exchanges to trade cryptocurrencies like Bitcoin.” In the last year alone, 75% of Bitcoins have been lostso far due to market prices collapsing. Other major events that have contributed to a loss in investor confidence include 3AC collapse and FTX Collapse .
The study conducted by the BIS suggests that increasing Bitcoin prices is what encourages crypto adoption, rather than any other potential causes.
Over the course of the last seven years, BIS has shown that crypto adoption is highest in Turkey, Singapore, United States and United Kingdom. However, it is lowest in China and India because legal restrictions prevent crypto adoptions from taking place.