Dec 6 (Reuters) - "I'm almost bankrupt," says Jad Fawaz, a cryptocurrency trader in Abu Dhabi. "I laugh because there is no point in exerting more depression and more frustration about it."
The 45-year-old, who quit his real estate job a year ago to focus on trading, has seen his holdings evaporate in recent months. He hasn't slept in a week due to stress.
โI was around 40 coins and then down to 20 coins, then down to 10 coins, down to five coins and now I'm down to the last two coins, and it's bitcoin and XRP ripple,โ he says.
"So these are the last two coins and I will die before I sell them."
For many retail traders and investors, enough is enough.
Bitcoin balances on crypto exchanges, where retail investors typically transact, have fallen to around 2.3 million from their 2020 all-time high of 3.1 million, exchange Bitfinex said. Self-custody wallet balances have not grown at the same rate, indicating more sales than storage, he added.
โThere are signs that a significant number of retail investors have become discouraged to the point of abandoning cryptocurrencies altogether,โ the Bitfinex analysts said.
In fact, Fawaz is not alone.
It's been a brutal year for investors. Bitcoin's price has fallen 63%, while the overall cryptocurrency market capitalization has lost $1.63 trillion in value.
The collapse of the Sam Bankman-Fried FTX exchange drove a long nail into the market.
November saw a 7-day realized loss of $10.16 billion in bitcoin investments as investors were forced to exit long-term positions, the fourth-biggest loss on record by this move, according to Glassnode data.
โThis is not the winter season anymore, it is a bloodbath, because the FTX crisis was like a domino that brought down so many companies,โ said Linda Obi, a crypto investor in the Nigerian city of Lagos who works at the Blockchain company Zenith Chain.
The 38-year-old said she was a "long haul" investor with a five-year investment horizon and traded "a little bit of everything" including altcoins and memecoins.
โI'm going to be very honest, I think there's a lot of hype around cryptocurrency, with influencer marketing and your favorite celebrities talking about cryptocurrency,โ she added.
"People don't investigate, they just jump in, and that should change. We've started having serious conversations about how we can sanitize and publicize the space."
DAVID AGAINST GOLIATH
Retail crypto investors losing money is nothing new. A Bank for International Settlements (BIS) study, conducted between 2015 and 2022, estimated that between 73% and 81% likely lost money on their cryptocurrency investments.
Retail trading has become increasingly difficult as more sophisticated and well-resourced investors like hedge funds got into crypto as the asset class grew.
"It's really hard to trade news because we don't have inside information, one tweet can change everything," said Lisbon-based Adalberto Rodrigues, 34, who trades cryptocurrencies as well as runs a software company.
The BIS researchers said that analysis of blockchain data found that larger bitcoin holders often sold while smaller players bought, "earning a return at the expense of smaller users."
Eloisa Marchesoni, a trader who said she had around $2,000 in FTX that she was unable to withdraw, is confident that cryptocurrencies will continue to be attractive to smaller investors.
"Retail will absorb it, as always," said Marchesoni, who is leaving near Tulum on the coast of Mexico's Yucatan Peninsula.
However, heavy investor losses from the FTX collapse could serve as a trigger for regulators to spring into action, said Charley Cooper, head of communications at blockchain technology firm R3.
โPoliticians find it much harder to ignore calls from constituents who have lost their savings or purchase money than from high-flying crypto hedge funds.โ
Reporting by Lisa Pauline Mattackal and Medha Singh in Bengaluru; Edited by Pravin Char
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