A recent report by the Bank of International Settlements (BIS) revealed that the crypto industry lost over $650 billion after two major scandals rocked the market last year.
In the last year the crypto industry was often faced with headlines such as the crypto crash, the collapse of the crypto industry or investors losing big. This is a string of scandals impacting the crypto industry leading to turmoil in the crypto market especially in the wider financial system.
In the last year, the crypto market saw many horrific incidents that forced several firms to declare bankruptcy, with over $1.8 billion wiped from the aftermarket.
One of the big events that happened was the collapse of the $40 billion Terra-Luna ecosystem in May. According to the BIS, more than $450 billion disappeared from the market after the incident.
About six months later, the world's third largest crypto exchange FTX collapsed, removing over $200 billion from the market.
Despite what happened, the BIS found that daily user activity increased on crypto trading platforms last year as investors tried to adjust their portfolios. They are trying to distance themselves from cryptos that are under pressure.
While whales and larger investors sold their holdings, medium-sized holders and retail investors increased their bitcoin holdings by buying during dips.
Furthermore, the report reveals a weak correlation between crypto losses and the broader financial system. The BIS suggests that the crypto scandal has limited impact on the wider financial sector due to the current level of crypto adoption.
While individual and institutional investors recorded huge losses in their crypto investments, the traditional financial system remained unaffected.
“Our analysis also suggests that the sharp decline in the size of the crypto sector has had no impact on the wider financial system so far. However, if crypto is more intertwined with the real economy and the traditional financial system, the aggregate impact of shocks in the crypto world may be greater,” the bank reported.
