Crypto investors lose their money as traders struggle to survive the market

Jad Fawaz, a trader in Abu Dhabi, says he's nearly bankrupt. I'm laughing because there's no point in having more depression and more frustration about it. The 45-year-old, who left his real-estate job a year ago to focus on trading, has seen his holdings evaporate in recent months. He hasn't slept in a week because of the stress.

I had about 40 coins and then came down to 20 coins, then came down to 10 coins, came down to five coins, and now I'm down to the last two coins, and it's bitcoin and ripple XRP, he says.

These are the last two coins that I will die before selling them. For retail traders and investors, enough is enough.

The balance of the digital asset on the exchanges, where retail investors typically transact, has fallen to around 2.3 million from its 2020 all-time high of 3.1 million, according to Bitfinex. Self-custody wallet balances have not grown at the same pace, indicating more selling than storage, it added.

There are signs that a significant number of retail investors have been discouraged to the point of exiting cryptocurrencies entirely, according to Bitfinex analysts.

Fawaz is not alone.

It's been a rough year for investors. The price of the digital currency has dropped 63 per cent, while the overall market value of the criptocurrency has lost $1.63 trillion in value.

The collapse of Sam Bankman- Fried's FTX exchange hammered a long nail into the market.

In November, investors were forced to exit long-term positions, the fourth largest loss on record by this measure, according to Glassnode data.

This is not the winter season anymore, this is a bloodbath because the FTX crisis was like a domino that toppled so many companies, said Linda Obi, a Nigerian investor who works at Zenith Chain in the Nigerian city of Lagos.

The 38-year-old said that she was a long-haul investor with an investment horizon of five years and traded a lot of everything, including altcoins and memecoins.

She said that there is a lot of hype around the topic of crypto, with influencer marketing and your favorite celebrities talking about it.

We have started to have serious conversations about how to sanitize space. The Bank of International Settlements BIS conducted a study between 2015 and 2022 and found that 73 per cent to 81 per cent lost money on their investments in cryptocurrencies.

More sophisticated investors like hedge funds entered the asset class as retail trading has become more difficult as the asset class grew.

Adalberto Rodrigues, 34, who is also running a software firm, said it's really hard to trade on news because we don't have inside information.

BIS researchers said that the largest holders ofBitcoin often sold while smaller players were buying, making a return at the smaller users' expense. Eloisa Marchesoni, a trader who said she had $2,000 on FTX but was unable to withdraw, is certain thatCryptocurrency will retain its appeal for smaller investors.

Marchesoni, who leaves near Tulum on the coast of Mexico's Yucatan Peninsula, said retail will suck it up like always.

Charley Cooper, communications chief at R 3 said that the FTX collapse could lead to regulators taking action, despite the hefty investor losses.

Politicians have a harder time ignoring calls from constituents that have lost their savings or grocery money than from high-flying hedge funds.