BIS report: "whales" outbid retail crypto investors
A report from the Bank for International Settlements (BIS): "whales" outplayed retail crypto investors
Large market participants were able to sell their assets to smaller ones before prices plummeted in 2022
"Whales" outplayed retail investors in 2022, according to a report from the Bank for International Settlements (BIS). Large market participants got rid of crypto assets during last year's rate crashes, while ordinary investors bought them. "During a storm, whales eat krill," the report said.
"Krill" or "shrimp" are the average or retail investors in the crypto market.
After analyzing the data, they concluded that most mobile crypto app users almost universally suffered losses from bitcoin investments in 2022.
According to the report, retail investors rushed to buy leading cryptocurrencies after the Terra ecosystem collapsed in May and FTX collapsed in November. Meanwhile, "whales" were selling these assets en masse - just at the expense of demand from smaller traders. Large wallet holders reduced their bitcoin holdings within days of the "shock episodes," while mid-sized and small investors increased their positions.
The price dynamics suggest that large investors were able to sell their holdings to smaller investors before the price plunge, the report said. Analysts concluded that in this way, the "whales" of the market made a profit at the expense of small investors.
At the same time, BIS head Agustin Carstens said in an interview with Bloomberg that cryptocurrencies have lost the "battle" with fiat currencies. After last year's turmoil in the digital asset industry, he said, the argument that cryptocurrencies are an alternative to fiat is over.
Carstens argues that technology doesn't make money reliable, and only the legal infrastructure behind central banks can "provide great confidence" in money.
Also speaking earlier at the Monetary Authority of Singapore (MAS), Carstens touched on the topic of stablecoins. He noted that regulators should ensure that such assets don't hurt investors and break the monetary system.
In early February, BIS announced plans to create a system to monitor stablecoins. The corresponding project, called Project Pyxtrial, will be launched by BIS's London division.
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