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Most retail investors have lost money on their forays into Bitcoin, finds a new report from the Bank for International Settlements (BIS).

In a new working paper, researchers built a novel database that covers retail investors’ use of crypto exchange apps in 95 countries from 2015 to 2022.

They find that increases in the price of Bitcoin spark an increase in retail investors downloading crypto exchange apps, and actively using those apps.

“Overall, our results suggest that rising Bitcoin prices are what drive crypto adoption,” it said, adding that the positive correlation between Bitcoin prices and retail crypto trading “remains robust when we control for other potential drivers, such as overall financial market conditions, uncertainty or country characteristics.”

“In particular, the price of Bitcoin remains the most important factor when we control for global uncertainty or volatility, contradicting explanations based on Bitcoin as a safe haven,” the researchers found.

At the same time, the researchers found that crypto’s new users are “disproportionately younger and male, commonly identified as the most ‘risk-seeking’ segment of the population.”

Overall, they conclude that the patterns of adoption and usage “are consistent with the speculative motive being caused by feedback trading considerations, i.e. users being drawn to Bitcoin by rising prices — rather than a dislike for traditional banks, the search for a store of value or distrust in public institutions,” it said.

Moreover, the researchers estimate that most — between 73% and 81% of retail investors — end up losing money on these initial investments.

“Analysis of blockchain data finds that, as prices were rising and smaller users were buying Bitcoin, the largest holders (the so-called ‘whales’ or ‘humpbacks’) were selling — making a return at the smaller users’ expense,” the paper said.

“Our findings raise concerns that individual decisions are backward-looking and that many retail investors are not fully informed of the risk or volatility of the crypto sector,” it concluded.

This finding, in turn, raises investor protection concerns, the paper said: “if users are driven primarily by backward-looking price movements, are they fully prepared for the potential consequences of a price correction?”

Moreover, as interest rates rise and global risk appetite declines, “the overall market could dry up,” it said. “If, following price declines, retail investors make losses and exit the market, there is the potential for self-reinforcing dynamics.”