Smaller players lose confidence in crypto after sales

WASHINGTON / MUMBAI, May 17 (Reuters) – Nofe Isah, a 25-year-old Nigerian, has been investing in crypto since January. Last week, she lost all her $ 5,000 in savings when the cryptocurrency luna went into free fall.

Isah, a recently unemployed administrative employee, swore she would never invest in crypto again.

“I can not believe I fell in love with crypto,” she told Reuters by phone. “I’m just not trying to get depressed. Crypto took my money, fine. It should not bother me.

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The crypto market, notorious for its price fluctuations, plunged last week as wild investors squeezed money from more risky assets due to concerns over rising inflation and rising interest rates.

Bitcoin, the world’s largest cryptocurrency, fell to $ 25,401 on Thursday, the lowest level since December 2020. It hit a record high of $ 69,000 in November.

Smaller tokens were also affected, with Ether, the second largest token, falling more than 15% to its lowest level since June. Luna – a digital currency that is highly hyped on social media and backed by institutional crypto investors – has lost almost all of its value.

Small traders like Isah have flocked to cryptocurrencies in hopes of quick returns, despite warnings from regulators that new assets could be high-risk.

Platforms like Robinhood, which has 23 million customers across a range of assets, have helped increase retail investment, including in crypto. About a quarter of Robinhood’s transaction-based revenue came from cryptocurrencies in the first quarter of this year, Robinhood said in its latest income statement.

The total number of users on crypto platforms has exploded. Binance, the world’s largest crypto exchange, had about 118 million customers last month, up from 43.4 million in the first quarter last year.

But after last week’s unrest, online forums were flooded with tales of doom as retail investors expressed anxiety over their losses.

“I’m 49, a big mortgage, 3 kids, etc. My retirement party is frozen for the foreseeable future!” a user with the Boring-Fun-3646 handle wrote on Reddit.

Another user with the handle AdventurousAdagio830 wrote on Reddit: “It does not seem right that I lost $ 180,000.”

‘DEATH SPIRAL’

A symbol of cryptocurrency risk was collapsed last week by terraUSD, a stablecoin designed to hold constant value via a complex algorithm involving luna.

When the parts came under heavy sales pressure, the system broke down. TerraUSD – designed to hold a value of $ 1 – traded around 9 cents on Tuesday, while Luna fell to almost zero, based on data from CoinGecko. Read more

Tejan Shrivastava, a 31-year-old graphic designer from Mumbai who has been investing in cryptocurrencies for a year, saw his $ 250 investment wiped out by the collapse of Luna.

“He was stuck in a death spiral. All the money was gone in 15 minutes, “he told Reuters.

“I do not even know if I will invest in crypto in the future. I have a crypto portfolio, but I plan to liquidate it when it balances.

Luna’s decline wiped out most of its market value, exceeding $ 40 billion as late as early April, according to data from CoinGecko.

The online frustration of retail investors has even spread to the real world.

Seoul police said last week they were looking for a suspect after an unidentified person rang the doorbell of terraUSD founder Do Kwon’s apartment and fled the scene.

Police would investigate whether the suspect had invested in cryptocurrencies, a Seoul police officer told Reuters.

LIGHT CONTROL

In its 13-year history, the crypto industry has been filled with staggering rises and sudden free falls. In November, for example, bitcoin fell by a fifth in just under two weeks after hitting a record high of $ 69,000. Six months earlier, it had dropped nearly 40% in just nine days.

Yet the latest cryptocurrency crash – which pushed the sector’s total value to $ 1.2 billion, less than half of what it was last November – led to the lunar crash, which on May 1 was the eighth largest cryptocurrency measured by market value.

Cryptocurrencies are subject to uneven regulation worldwide, with bitcoin traders and panapolis tokens plus the small ones generally not being protected from price declines.

But it is difficult to measure the extent of retail investors’ pain from the cryptocurrency and the consequences for the future appetite given the opaque nature of the market.

In the UK, more than 4% of adults – around 2.3 million people – issue cryptocurrencies, according to data released last year by the UK’s financial watchdog.

The British watchdog said the understanding of crypto had dropped from a year earlier, “suggesting that some crypto users may not understand what they are buying.”

Still, some small investors keep the faith.

Eloisa Marchesoni, who is based near Tulum in Mexico and invests with a crypto syndicate, said she would not give up.

“I’m looking to buy the dip – we’re all waiting for bitcoin to go down to $ 22,000, which is nothing too likely, but nothing ‘not at all likely’.”

Marchesoni also hedges its crypto bets with physical assets – “cars because you can rent them, watches, real estate.”

Bitcoin hovered around $ 30,000 on Tuesday, after losing more than 20% so far this month.

Regulators remain on alert. The British government said last month that it would regulate stack coins. Read more

The US Securities and Exchange Commission is sharpening its position. SEC President Gary Gensler said this week that cryptocurrency investors need more protection. Read more

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Additional reporting by Alun John in Hong Kong and Soo-hyang Choi in Seoul; Written by Carolyn Cohn, Elizabeth Howcroft and Tom Wilson in London. Edited by Jane Merriman

Our standards: Thomson Reuters Trust Principles.

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