A survey of 1,269 UK consumers conducted on behalf of AJ Bell by findoutnow suggests:
• 7% of adult Britons have bought crypto over the last year
• That compares to 5% who invested in a Stocks and Shares ISA, according to HMRC data released last week (for the 2019/20 tax year)
• 71% of those who bought crypto report having made a profit
• Buyers are predominantly male, and under 35
• 81% of UK consumers say they don’t understand how cryptocurrencies work
• Latest Musk comments spark another twist in the Bitcoin tale
Laith Khalaf, financial analyst at AJ Bell, comments:
“When more people are buying cryptocurrency than investing in a stockmarket ISA, you have to conclude the world’s gone crypto crazy. It’s possible that cryptocurrencies will ultimately prove to be profitable in the long run, though that’s still highly debatable. Meanwhile it’s hard to argue with historical performance data which shows an investment in the stockmarket has almost always paid off in the long term. It certainly looks like some consumers are jumping into the deep end with cryptocurrencies, before learning how to swim in shallower waters. The vast majority admit to not understanding how cryptocurrencies work, which highlights the complexity involved in crypto markets.
“Clearly a large proportion of those who have bought crypto in the last twelve months are sitting on tidy profits, though 12% of our survey respondents report having made a loss, and perhaps more concerningly, 17% said they don’t know if they’re in the black or the red with their crypto purchase. Even those who have made money shouldn’t be complacent about the risks inherent in cryptocurrencies, as profits can be quickly wiped out by extreme price swings.
“Indeed, the price of Bitcoin remains in thrall to the Twitter activity of Elon Musk, which underlines just how heavily crypto prices are influenced by sentiment, rather than economic fundamentals. Musk’s twitterings are not insignificant, seeing as he is CEO of one of the world’s most valuable companies, however they are hardly a measure of wider business sentiment towards Bitcoin. That matters because a big part of the potential value of Bitcoin lies in its ability to be used as a medium of exchange. Ironically, as long as Bitcoin’s volatility continues to be heightened by something as extraneous and unpredictable as a tweet, it’s unlikely to find the firm foundations needed to genuinely bridge transactions between businesses and consumers.
“There’s no harm in buying crypto if you have lots of other bases covered with your finances, and any losses won’t affect your overall wealth too badly. Younger people do have more confidence in their understanding of cryptocurrencies, but the youthful profile of crypto buyers suggests they may have accumulated few assets so far and could find their finances seriously damaged if crypto markets take a turn for the worse. Most (56%) of the crypto buyers in our survey were under 35, and almost two thirds (64%) were male. While younger consumers do have time to rebuild their wealth if their investments take a nosedive, that’s still an experience to be avoided if possible.”
Sources:
Survey of 1,269 UK consumers carried out on behalf of AJ Bell by findoutnow
https://www.ons.gov.uk/peoplepopulationandcommunity/populationandmigration/populationestimates
