• The Bank for International Settlements (BIS) recently published a report stating that crypto investors in emerging economies were hit hardest by the collapse of Terra and FTX.
• The BIS reported that around $450 billion was lost from the crypto market after Terra’s implosion in May 2022, and another $200 billion was lost after FTX’s bankruptcy in November.
• Investors outside of major economies were affected the most.
Impact of Crypto Contagion
The Bank for International Settlements (BIS) recently published a report highlighting the impact of last year’s collapse of two prominent crypto ecosystems – Terra and FTX – on investors across the world. The report revealed that crypto investors in emerging economies, particularly those located outside major economic centers, took the biggest hit from these collapses.
Terra Collapse
In May 2022, more than $450 billion was wiped out from the global crypto market following Terra’s implosion. This led to significant losses for many investors worldwide who had holdings in digital currencies or projects related to Terra’s ecosystem.
FTX Bankruptcy
In November 2022, another $200 billion was lost when FTX declared bankruptcy. This further worsened investor losses as many people had invested their money into cryptocurrency using FTX’s services.
American Investors Losing Money
The BIS noted that losing money due to risky investments is not an uncommon occurrence: In 2021 alone, American investors lost approximately $9 trillion due to falling stock prices. However, it is worth noting that individuals investing in digital currencies are far more exposed to such risks as they are largely unregulated assets with both high volatility and liquidity risk associated with them.
Conclusion
Overall, this report shows how vulnerable non-institutionalized investors can be when dealing with digital assets like cryptocurrencies which remain highly volatile and largely unregulated despite their growing popularity over recent years. As such, it is important for individuals investing in these assets to do so cautiously and always research about potential risks extensively before making any decisions related to their investments.