Economists from the Bank for International Settlements (BIS) considered the central bank of central banks have conducted a detailed study that aims to understand the profiles of cryptocurrency buyers by analyzing data from 95 countries between 2015 and 2022. The objective is to analyze the implications of cryptocurrencies for the financial system but also to understand how to put in place consumer protection rules when between 73% and 81% of buyers have lost money on their Bitcoin investments, according to their calculations.
The study, which is based on data concerning in particular the downloads of Bitcoin purchase applications or the daily frequency of transactions, shows that nearly 40% of users are men under 35 years old, more willing to take risks, compared to 25% of men aged 35 to 54 and 35% of women, the majority of them under 35. Over the period studied, the price of Bitcoin rose from $250 in August 2015 to $69,000 at its peak in November 2021. The average number of daily application users then rose from around 119,000 to more than 32.5 million, jumping in particular between the end of 2017 and the beginning of 2021, quantifies the study which highlights a correlation between the rise in Bitcoin prices and the arrival of new users.
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Big investors made profits ‘at the expense of smaller users’
According to an equation developed by BIS economists, a 1 percentage point rise in Bitcoin translates to a 1.1% increase in the monthly average number of daily users. However, some 73% of users downloaded an application when the price of Bitcoin was above $20,000, more than its price in October 2020, which means that they lost money, they point out. If a user first invested $100 in the first month and then the same amount in subsequent months, around 81% of buyers lost money, according to their calculations.
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The analysis of the size of the portfolios invested nevertheless highlights that the small buyers of Bitcoin, with a portfolio ranging from 1 to 1,000 Bitcoins, tended to buy in the upward phases while the large investors, called the whales, with wallets of over 100,000 Bitcoins, tended to sell. They thus made profits “at the expense of the smallest users”, according to this study. The idea that cryptocurrencies will “democratize the financial system” therefore deserves to be analyzed in more detail, according to its authors.
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