July 23, 2024
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Rags to Riches, Riches to Rags: Retail Crypto Price-Chasing Loses Money, BIS Report

Cryptocurrencies have become increasingly popular over the past several years, with Bitcoin leading the charge. Several individual investors joined the bandwagon as cryptocurrency prices soared in an effort to turn a quick profit. Unfortunately, many investors found that their foray into the cryptocurrency world was traumatic, with the majority of them losing money.

The extremely volatile nature of cryptocurrencies is one of the key reasons why individual investors have lost money. Cryptocurrency prices can change drastically, often by as much as 10% to 20% in a single day. Due to this, it is very challenging for individual investors to precisely predict price swings, which results in bad investment choices.

In April 2021, the price of Bitcoin rose to a record-breaking high of about $65,000 before falling to just under $30,000 in June. Bitcoin is currently trading at $24,000, more than 65% below its all-time high. Individual investors with lesser sums of cash known as “retail buyers” are frequently more vulnerable to market volatility and may be more susceptible to suffering losses.

Retail investors’ losses can also be attributed to their lack of awareness and comprehension of the underlying technology and market dynamics of cryptocurrencies. To enter the market and avoid making poor investment decisions based on hype and speculation, retail investors must conduct adequate due diligence and research. In addition, the necessity for additional control and regulation of the bitcoin market has added to the losses suffered by individual investors.

Because cryptocurrency marketplaces are generally unregulated, unlike traditional financial markets, investors are at risk of scams and price manipulation.

Last but not least, ordinary investors’ tendency to follow the crowd has also contributed significantly to their losses. When cryptocurrency prices peaked, a lot of investors entered the market out of a sense of not wanting to miss out on any potential gains. even after buying binges from wealthy professional traders or whales. Unfortunately, many ordinary investors panicked as prices fell, which exacerbated their losses.