Trading on major exchanges spiked following collapse of Terra, FTX: BIS report

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

In a February 20 bulletin on BIS’ “crypto shocks and retail losses” reports that while the price of bitcoin (BTC), ether (ETH) and other currencies fell in 2022, the number of daily active users on some exchanges, including Coinbase and Binance, “grew noticeably” after the news of the collapse of Terra and FTX. The bank suggested that “users were trying to ride out the storm” by shifting their investments to stablecoins and other tokens, which probably didn’t look bearish at the time.

Source: BIS

In contrast, the BIS reported that the whales on the aforementioned exchanges were “probably cashing out at the expense of smaller holders”, reducing their holdings of BTC as retail investors bought the cryptocurrency. The bank said analysts studied the number of crypto investment app downloads, noting that roughly 75% of users downloaded the app when BTC was worth more than $20,000, and assumed that each user bought $100 in BTC in the first and every month thereafter.

BIS-funded regulator explores DeFi entry points like stablecoins

“Data on major crypto trading platforms from August 2015 to December 2022 show that […] the majority of crypto application users in almost all countries have suffered losses due to their bitcoin holdings,” the BIS report says. “By December 2022, the average investor would have lost $431, which is almost half of their total $900 invested since downloading the app.” The bank adds:

“While the collapse of the cryptocurrency may have affected individual investors, the cumulative impact on the system as a whole was limited.”

The market crash in 2022 has led industry leaders and regulators to speak out on issues ranging from the lack of oversight of a major exchange like FTX to how the cryptocurrency market can rise to be able to influence traditional financial markets. In the United States, several bankruptcy cases are pending for firms such as FTX, Celsius Network and Voyager Digital, while authorities advance criminal charges against former FTX CEO Sam Bankman-Freed.

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