The Bank For International Settlements (BIS), the central banks-owned international financial institution, revealed in a new report that trading activities on major centralized cryptocurrency exchange platforms surged days after the controversial collapse of crypto firms Terraform Labs and FTX.
Last year, the cryptocurrency industry experienced two colossal crashes that brought the market to its knees and pushed major crypto assets to move into the red zone.
The de-peg of the so-called algorithmic stablecoin TerraUSD (UST) and the crash of Terra’s native token LUNA wiped away billions worth of investments in May.
But the crash of FTX and its affiliates in November was the final nail in the coffin that prompted investors to move their assets away from centralized crypto exchange platforms.
The massive exodus from CEX alarmed crypto executives and eventually prompted them to release individual proof of reserves to assure investors that their funds were still in the platform and that they could withdraw them anytime they want.
Interestingly, in the report released by the BIS on Monday, it revealed that although prices of major crypto assets plummeted last year, the number of daily active users in major CEXs like Binance and Coinbase “increased markedly,” particularly after news of major crypto businesses collapse.
The report suggested that this increase in trading activities among CEXs could be users’ attempt to weather the storm by moving their investments from one crypto asset to another.
“These patterns suggest that users tried to weather the storm by adjusting their portfolios away from owning tokens under stress towards other crypto assets, including asset-backed stablecoins,” the report said.
As for whales on major crypto exchange platforms, the report revealed that the majority of large investors reduced their Bitcoin stash as retail investors purchase crypto assets.
“However, larger investors probably cashed out at the expense of smaller holders. The data reveal that owners of large wallets, the “whales”, reduced their holdings of bitcoin in the days after the shock episodes,” the BIS said.
Moreover, the Bank for International Settlements also noted that “while the crypto collapse may have affected individual investors, the aggregate impact on the broader system was limited,” adding that “the evidence suggests that crypto shocks have a limited impact on equity prices or broader financial conditions.”
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