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Trading on major exchanges surged after Terra collapse, FTX: BIS report

Trading on major exchanges surged after Terra collapse, FTX: BIS report

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A report by the Bank for International Settlements (BIS) suggested that trading activity on major exchanges picked up in the days following the collapse of crypto firms FTX and Terraform Labs.

According to a Feb. 20 bulletin on “Crypto Shocks and Retail Losses,” the BIS reported that while the price of bitcoin (BTC), ether (ETH) and other tokens fell in 2022, the number of daily active users on some exchanges fell including Coinbase and Binance “noticeably up” after news of Terra and FTX collapse. The bank suggested that “users were trying to weather the storm” by shifting their investments into stablecoins and other tokens that probably weren’t looking bearish at the time.

Source: BIS

In contrast, the BIS reported that whales on the aforementioned exchanges “were likely paid off at the expense of smaller owners” by reducing their BTC inventories as retail investors bought crypto. The bank said analysts looked at the number of crypto investment app downloads and found that about 75% of users downloaded an app when BTC was more than $20,000 and assumed that each user in the first month and each subsequent month $100 in BTC.

Related: BIS-funded regulator investigating DeFi entry points like stablecoins

“Data on major crypto trading platforms from August 2015 to December 2022 shows that (…) a majority of crypto app users in almost all economies have made losses on their Bitcoin holdings,” reads the BIS report. “The average investor would have lost $431 by December 2022, which is almost half of their total $900 in funds invested since downloading the app.” The bank adds:

“While the crypto meltdown may have impacted individual investors, the overall impact on the broader system has been limited.”

The 2022 market crash has prompted industry leaders and regulators to comment on various concerns, from the lack of oversight on a major exchange like FTX to the potential growth of the crypto market, which has the potential to impact traditional financial markets. Multiple bankruptcy cases are ongoing in the United States for companies including FTX, Celsius Network and Voyager Digital, while authorities continue criminal charges against former FTX CEO Sam Bankman-Fried.

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