Study Shows FOMO Delivers Cryptokrill to Bitcoin Whales with up to 81% Losses

Study Shows FOMO Delivers Cryptokrill to Bitcoin Whales with up to 81% Losses

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(Kitko News) – The cryptocurrency community is brimming with experts and ideologues praising cryptocurrencies as a smart way to hedge against inflation, or a principled way to avoid corrupt financial systems, or a smart way to protect yourself from global crises.

A recent study by the Bank for International Settlements (BIS) shows that these arguments are like a smorgasbord in a casino: a nice bonus, if there is one, and a convenient way to justify all the activity, but not something that brings people in the door.

In a working paper entitled “Crypto Trading and Bitcoin Prices: Data from the New Retail Adoption Database”, authors Sebastian Doerr, John Frost, Rafael Auer, Giulio Cornelli, and Leonardo Gambacorta created a large dataset on the daily use of a cryptocurrency exchange app by retail investors in 95 countries from 2015 to 2022.

The authors show that there is one irresistible factor that encourages people to download crypto applications and buy bitcoins: rising prices.

“First, we show that the rise in the price of Bitcoin is associated with a significant increase in the number of new users, i.e. the emergence of new investors,” they write, adding that the positive correlation between newsworthy price increases is strong, even if they controlled by others. factors such as “general financial market conditions, uncertainty or country characteristics”.

Perhaps most eloquently, they write that “Bitcoin’s price remains the most important factor when we control global uncertainty or volatility, which is contrary to explanations based on Bitcoin as a safe haven.” Even when differences in quality and trust in institutions or levels of economic development are taken into account, simple price increases “still have an economically and statistically significant impact on the number of new users and account for the lion’s share of the variation in new user acquisition.”

The study also makes it clear that the “crypto bro” stereotype is well deserved. “The largest group of users — almost 40% — are men under the age of 35,” they write. “Men between the ages of 35 and 54 averaged another 25%.” This means that over 65% of the people on platforms like Binance, Coinbase, and (shudder) FTX are male, and they misrepresent the young.

What makes this demographic special in the world of finance? Are these their smart spending decisions? Their passion for careful planning? Maybe it’s their deep understanding of the macroeconomic and historical factors that affect financial markets? Perhaps a penchant for due diligence?

If you said risk-taking, you are right. Men under 35 are the “most risk-averse” segment of the population and are “more sensitive to changes in the price of bitcoin than female users and older men.”

Adopting a crypto platform and investing in bitcoin is a game for young people. “Less than 35% of all users worldwide are women, and the majority of female crypto app users are under 35,” they write.

When the authors compared download and purchase times with download and purchase demographics, the conclusion was clear: “Taken together, these patterns are consistent with a speculative motive driven by feedback trading considerations, i. rising prices, not a dislike of traditional banks, a search for a store of value, or distrust of government institutions.”

But hey, this demo might answer, so what? So we young people get into crypto when crypto is doing well… what does it matter? Well, as most older men (and almost all women) will happily tell them, jumping on the bandwagon and buying high is a lousy investment. Young goats are led like lambs to the slaughterhouse. Or like krill to whales.

The authors write that their findings “support the notion that, in general, investors view cryptocurrencies as a speculative investment (“gamble”) rather than as a means of payment for real economic transactions.” They also ask a self-answered question in the post-Luna, post-venture, post-FTX world: “if users are driven primarily by retrospective price action, are they fully prepared for the potential consequences of price changes?” correction?”

“Our estimates that 73-81% of global investors likely lost money on their cryptocurrency investments, and that larger investors (“humpbacks”) tended to sell when smaller investors buy, may provide reason for looking deeper into claims that cryptocurrencies will “democratize” the financial system,” they conclude.

Well, if almost everyone who voted with their wallets suffers huge losses from their crypto-currency “investments”, it’s a kind of democracy, isn’t it?

Denial of responsibility: The views expressed in this article are those of the author and may not be those of the author. Kitco Metals Inc. The author has made every effort to ensure the accuracy of the information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is for informational purposes only. This is not a call for the exchange of goods, securities or other financial instruments. Kitco Metals Inc. and the author of this article are not liable for any loss and/or damage resulting from the use of this publication.

Written by khirou

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