Crypto: The Rich Got Richer, Retail Investors Paid the Price

Personal opinion and independent analysis. This article is not investment advice.

There is a story about cryptocurrency that has been repeated so many times that it has almost become conventional wisdom.

Bitcoin was created. Early adopters became millionaires. The technology revolutionised finance. Those who believed early were rewarded. Those who stayed invested became wealthy.

There is some truth in this story.

But there is also a much larger part of the story that is rarely discussed:

the people who made the spectacular returns are not necessarily representative of the people who entered the market later.

And once we look at cryptocurrency from the perspective of the average retail investor rather than from the perspective of Bitcoin’s most successful holders, the picture becomes considerably less glamorous.

2016: the beginning of the modern crypto wealth cycle

In 2016 Bitcoin was still a relatively marginal financial asset.

The price was measured in hundreds of dollars rather than tens of thousands. Cryptocurrency was largely the territory of technology enthusiasts, libertarians, early adopters and highly speculative investors.

Bitcoin also dominated the market: academic research shows that it represented roughly 90% of cryptocurrency market share in January 2016. (Springer⁠)

The subsequent decade changed everything.

Bitcoin experienced enormous appreciation, followed by spectacular crashes in 2017–18, 2020–21 and 2022, before entering another institutionalisation phase following the approval of spot Bitcoin ETFs in 2024.

Looking only at the price chart, the conclusion appears obvious:

Crypto was an extraordinary investment.

But a price chart is not a distribution of investor returns.

That distinction is fundamental.

The price went up. That does not mean most investors became rich.

This is probably the most important point missing from most crypto discussions.

An asset can increase enormously in value while the majority of its users fail to capture the headline return.

Why?

Because investors do not buy an asset once and hold it forever.

They buy at different prices.

They sell.

They buy again.

They chase momentum.

They panic during crashes.

They move from Bitcoin into altcoins.

They buy after prices have already increased.

And they frequently enter the market precisely when the media narrative becomes most optimistic.

This is not simply a theoretical argument.

A major BIS study analysing crypto exchange-app usage across 95 countries between 2015 and 2022 found that new retail users tended to enter when Bitcoin prices were rising. The researchers estimated that 73–81% of retail investors likely lost money on their initial Bitcoin investment. (Bank for International Settlements⁠)

The BIS subsequently concluded that a majority of crypto-app users in almost every economy made losses on their Bitcoin holdings. (Bank for International Settlements⁠)

That finding radically changes the popular narrative.

The question is no longer:

“How much did Bitcoin increase?”

The more relevant question is:

“Who actually captured those returns?”

The asymmetry between large holders and retail investors

The same BIS research contains an even more uncomfortable observation.

When cryptocurrency prices rise, retail participation tends to increase.

In other words:

people arrive after the price has already started moving.

The research also found evidence that when prices rise, retail investors buy while larger holders sell.

That creates a structural asymmetry.

The sophisticated investor has already accumulated the asset.

The public discovers it later.

The public buys because the price is rising.

The large holder has an opportunity to sell into that demand.

This is not unique to cryptocurrency.

It is a recurring feature of speculative markets.

But crypto amplified it because social media transformed price appreciation into a permanent marketing machine.

The greatest crypto product may have been FOMO

Fear of missing out became one of the most powerful forces in the cryptocurrency market.

The message was extraordinarily simple:

You are still early.

If Bitcoin was at $5,000, people were told that $50,000 was coming.

At $50,000, the argument became $500,000.

When Bitcoin crossed $100,000, the conversation moved toward one million dollars.

The exact number was never particularly important.

The psychological mechanism was.

Every new price level became evidence that the next price level was inevitable.

This created a feedback loop:

price increases → media attention → social-media enthusiasm → new investors → additional buying → higher prices → even more enthusiasm.

Research by the BIS confirms an important part of this mechanism: rising Bitcoin prices were followed by increased downloads and use of crypto trading applications. (Bank for International Settlements⁠)

The market therefore did not simply attract investors.

The market attracted investors precisely when the story looked most attractive.

That is a very different proposition.

The problem with X

This is where cryptocurrency becomes particularly interesting.

If someone wants to understand the real experience of the average crypto investor, X is probably one of the worst places to look.

Not because everything on X is false.

But because the platform creates an enormous selection bias.

Imagine two investors.

Investor A bought Bitcoin early, became extremely wealthy and now spends his time discussing Bitcoin online.

Investor B bought an altcoin near the top, lost 70%, stopped trading and disappeared from social media.

Whose opinion are you more likely to see?

Investor A.

Investor B has no incentive to post every day about his losses.

This creates a digital illusion:

the people who remain visible are disproportionately the people who survived and benefited.

The result is a virtual room in which everyone appears to be winning.

But the room is not a representative sample of the market.

And then there are the influencers

There is another problem.

Not every enthusiastic crypto commentator is an independent investor.

Some are businesses.

Some earn advertising revenue.

Some receive affiliate commissions.

Some promote tokens.

Some receive compensation from projects.

And some have historically promoted crypto assets without adequately disclosing the financial relationship.

This is not speculation.

The SEC has actually brought enforcement actions over crypto promotions on social media.

In 2022, the SEC charged Kim Kardashian for promoting EthereumMax without disclosing that she had received $250,000 for the post. She agreed to pay $1.26 million to settle the case. (SEC⁠)

In 2023, the SEC took action against former NBA player Paul Pierce for promoting EMAX on Twitter without disclosing compensation. According to the SEC, Pierce had received more than $244,000 worth of EMAX tokens. (SEC⁠)

These cases do not prove that most crypto commentators are paid.

They prove something more important:

the financial incentive to promote crypto on social media is real, documented and large enough to have generated regulatory enforcement.

Therefore, the rational investor should never automatically interpret enthusiasm as conviction.

Sometimes enthusiasm is simply a business model.

The altcoin factory

Bitcoin is only one part of the story.

The real retail casino became much larger when thousands of alternative tokens appeared.

Ethereum created an enormous ecosystem.

Then came ICOs.

Then DeFi.

Then NFTs.

Then meme coins.

Then play-to-earn.

Then metaverse tokens.

Then AI tokens.

Every cycle created a new vocabulary and a new reason why “this time is different.”

The problem was that most investors did not own the winners.

They owned the narrative surrounding the winners.

For every Bitcoin that survived, thousands of tokens disappeared, collapsed, became illiquid or were effectively abandoned.

And this is where comparing cryptocurrency to traditional equity markets becomes misleading.

Owning a diversified portfolio of productive businesses is fundamentally different from buying hundreds of speculative tokens whose valuation depends primarily on the willingness of another investor to pay a higher price.

The 2022 lesson

The collapse of Terra/Luna and the bankruptcy of FTX should have permanently changed the crypto narrative.

Instead, the market eventually recovered.

That recovery is precisely why the lesson was partially forgotten.

The BIS documented what happened during the 2022 crisis: after the Terra/Luna collapse and the FTX bankruptcy, large and sophisticated investors were selling while smaller retail investors were buying. (Bank for International Settlements⁠)

More than $1.8 trillion of crypto market value disappeared during the 2022 collapse. (Bank for International Settlements⁠)

Yet the surviving narrative became:

“Crypto crashed, but Bitcoin came back.”

That statement is true.

But it hides the distributional question.

How many investors sold at the bottom?

How many investors bought near the top?

How many moved from Bitcoin into altcoins and never recovered?

How many simply stopped investing?

A market’s eventual recovery does not automatically recover an investor’s realised loss.

The rich can wait. Retail investors often cannot.

This may be the deepest structural difference.

A wealthy investor can buy an asset and wait for five or ten years.

A retail investor may need the money for rent, a mortgage, education, retirement or an emergency.

The same 70% drawdown has radically different consequences for different people.

For a billionaire, a speculative allocation can represent a small percentage of wealth.

For a retail investor convinced that crypto is the path to financial independence, it can represent a substantial percentage of savings.

This is why the statement “Bitcoin always comes back” is economically incomplete.

The asset can recover.

The investor may not.

Crypto did create enormous wealth

This article is not an argument that nobody made money from crypto.

Quite the opposite.

Some people made extraordinary fortunes.

Early Bitcoin holders.

Founders.

Exchange owners.

Venture investors.

Infrastructure companies.

Mining companies.

Large traders.

Institutional investors.

And individuals who had the rare combination of early entry, conviction, liquidity and the ability to hold through multiple crashes.

Crypto undeniably created billionaires and multimillionaires.

But this does not demonstrate that cryptocurrency created broad-based financial prosperity.

It demonstrates that cryptocurrency created extraordinary winners.

Those are not the same thing.

The survivorship-bias problem

The history of crypto is now dominated by its survivors.

We talk about Bitcoin.

We talk about Ethereum.

We talk about the people who bought them early.

We rarely talk about the enormous number of projects, traders and investors that disappeared.

This is classic survivorship bias.

If you analyse only the companies that survived the stock market, entrepreneurship looks easy.

If you analyse only the cryptocurrencies that survived, crypto investing looks easy.

But investment analysis should include the failures.

Otherwise we are not studying the market.

We are studying its advertising campaign.

The uncomfortable conclusion

After roughly a decade of mass cryptocurrency speculation, the evidence suggests a much more complicated reality than the standard crypto success story.

Yes, cryptocurrency created spectacular wealth.

Yes, Bitcoin dramatically increased in value.

Yes, some early investors became extremely wealthy.

But the evidence also indicates that retail investors frequently entered after substantial price increases, and the BIS estimates that roughly three-quarters of users lost money on their initial Bitcoin investment. (Bank for International Settlements⁠)

The market therefore appears less like a democratic wealth-creation machine and more like a highly volatile wealth-transfer mechanism in which timing, information, liquidity and behavioural discipline matter enormously.

And social media can make the imbalance even harder to see.

Because the person posting “Bitcoin to the moon” may be an investor.

Or an entrepreneur.

Or an affiliate marketer.

Or a token promoter.

Or someone who has already made his money and now benefits from attracting the next wave of buyers.

The prudent question is therefore not:

“Are people excited about crypto?”

It is:

“Who benefits financially from my becoming excited about crypto?”

That is the question investors should have been asking since 2016.

And it remains the question they should be asking today.

Roberto Balbino
CEO, Fintech SBB
Independent Analysis — Personal Opinion