Nofe Isah, a 25-year old based in Nigeria, has lost all of her $5,000 in savings as cryptocurrency luna went into free fall.
Nofe Isah, a 25-year old based in Nigeria, has been investing in crypto since January. Last week, she lost all of her $5,000 in savings as cryptocurrency luna went into free fall.
Isah, a recently unemployed administrative officer, vowed she would never invest in crypto again.
“I can’t believe I fell for crypto,” she told Reuters by phone. “I’m just trying not to get myself depressed. Crypto has taken my money, fine. It shouldn’t take my head.”
The crypto market, known for its wild price swings, slumped last week as investors yanked money from riskier assets amid worries over soaring inflation and rising interest rates.
Bitcoin, the world’s largest cryptocurrency, fell as low as $25,401 on Thursday, its lowest since Dec. 2020. It hit a record high of $69,000 in November.
Small tokens were hit too, with ether, the second-largest token, dropping more than 15% to its lowest since June. Luna – a digital coin widely hyped on social media and backed by institutional crypto investors – shed nearly all of its value.
Small traders such as Isah have flocked to cryptocurrencies in the hope of quick returns, despite warnings from regulators that the emerging assets can be high risk.
Platforms such as Robinhood, which has 23 million customers across a variety of assets, have helped spur retail investing, including in crypto. Around a quarter of Robinhood’s transaction-based revenues came from cryptocurrencies in the first quarter of this year, Robinhood said in its latest earnings statement.
Overall user numbers at crypto platforms have ballooned. Binance, the world’s biggest crypto exchange, had some 118 million clients last month, up from 43.4 million in the first quarter of last year.
But after last week’s turmoil, online forums were awash with tales of woe, as retail investors expressed anguish about their losses.
“I’m 49, big mortgage, 3 kids etc. My retirement party is on ice for the foreseeable future!”, a user with the handle Boring-Fun-3646 said on Reddit.
Another user with the handle AdventurousAdagio830 posted on Reddit: “It doesn’t seem real that I lost $180,000.”
‘Death Spiral’
Emblematic of crypto risks was the collapse last week of terraUSD, a stablecoin designed to keep a constant value via a complex algorithm that involved luna.
When the coins came under heavy selling pressure, the system broke down. TerraUSD – designed to keep a value of $1 – traded around 9 cents on Tuesday while luna plunged to near-zero, based on CoinGecko data.
Tejan Shrivastava, a 31-year old graphic designer from Mumbai, who has been investing in cryptocurrencies for the last year, had his $250 investment wiped out by luna’s collapse.
“It was stuck in a death spiral. All the money was gone in 15 minutes,” he told Reuters.
“I don’t even know if I’ll invest in crypto in the future. I have a crypto portfolio, but I am planning to liquidate it once it reaches break even.”
Luna’s fall wiped out most of its market value which had been above $40 billion as recently as early April, CoinGecko data shows.
Regulators remain on alert. The British government said last month it will regulate stablecoins.
The US Securities and Exchange Commission is toughening its stance. Gary Gensler, SEC chair, said this week investors in cryptocurrencies needed more protections.
Source:ndtv.com