New consumer research* from AJ Bell suggests:
• Almost half of UK crypto investors (47%) don’t have an ISA
• …and around four in ten (38%) don’t have a pension
• Most crypto investors are dabblers – seven in ten (69%) have less than 10% of their total assets in crypto
• But a third aren’t prepared to lose any money on their crypto investment
• Inflation concerns aren’t driving crypto purchases
*AJ Bell survey conducted by findoutnow of 1,283 cryptocurrency holders between 9 and 11 February 2022
Laith Khalaf, head of investment analysis at AJ Bell, comments:
“Our consumer research suggests that a high proportion of crypto investors are jumping in at the deep end of the risk spectrum, and bypassing the basic building blocks of a financial plan. ISAs and pensions are valuable tools that consumers can use to grow their wealth, but these are being ignored by a large swathe of the crypto community. Almost half of UK crypto holders don’t have an ISA, and around four in ten don’t have a pension, based on respondents to our survey.
“Many crypto buyers also seem to seriously underestimate the dangers of their investment, with a third saying they wouldn’t be willing to lose any of their capital. That’s not a comfortable position to be in, given the extremely volatile nature of cryptocurrencies, and the deep uncertainty about their future usage. The FCA has rightly warned investors that they should be willing to lose any money they put into cryptocurrency, but only three in ten consumers surveyed said they would countenance that level of loss. It’s an extreme case, but then again, extremity is a key feature of crypto price movements.
“Cryptocurrencies are a relatively new phenomenon, and their long term survival still has a big question mark over it, so putting money into crypto is more an act of faith than logic. In ten years’ time, it’s possible the price of Bitcoin will be significantly higher than it is now, it’s also possible it will be close to worthless. It’s such a new and evolving market that no one can predict with any confidence which one of these scenarios, or any in between, might prevail.
“The same is not true of investing in the stock market. While there are no guarantees, there’s a very good chance that over ten years you will make a positive return from an investment in stocks. The value of shares in the market is back by companies doing business in the real economy, which can’t just disappear in the same way as excitement about a new cryptocoin being launched can evaporate overnight. For novice investors, a simple, low cost tracker fund, purchased in an ISA, will likely fit the bill. Investing is about gradually building up a nest egg, rather than getting rich quick.
“Our research suggests there are some investors who are buying cryptocurrencies in a sensible manner - on top of a diversified portfolio, and with their eyes wide open to the potential losses. Around seven in ten have less than 10% of their overall savings and investments held in crypto, which is a proportionate approach, and suggests many crypto buyers are in fact just dabblers. But on the other hand, three in ten crypto buyers have more than 10% of their overall assets held in crypto, which means crypto losses could potentially have a sizeable impact on the value of their overall savings pot.
“Crypto assets, and Bitcoin in particular, have been described as a digital version of gold, in that they can be held a store of value and a hedge against inflation. Their extreme price volatility means they are ill-equipped to do either of those things, but interestingly while this rationale has been circulating in the crypto industry, it’s not really captured the imagination of consumers who are buying cryptocurrencies. Only 7% said one of the reasons they bought crypto was as a hedge against inflation.
“The most popular reason given for buying crypto was to capitalise on digital trends, which makes more sense. Almost a third of crypto buyers have been attracted by exceptional past performance though, which is a worry seeing as the tremendous gains seen in crypto prices may well fizzle out, or worse, go into reverse. Bitcoin has lost around a third of its value since it peaked last year, and while it may rally again, it offers investors no intrinsic value to hang their hat on. Its price will therefore be heavily influenced by sentiment, which is a fickle and dangerous beast to ride.”
AJ Bell Crypto Survey Results
The survey of 1,283 cryptocurrency holders was carried out by findoutnow on behalf of AJ Bell between 9th and 11th February 2022.
|
Do you have any of the following? (tick all that apply) |
||
|
Yes |
No |
|
|
Stocks and Shares ISA |
38% |
62% |
|
Cash ISA |
30% |
70% |
|
Savings account |
59% |
41% |
|
Pension |
62% |
38% |
|
General Investment portfolio |
21% |
79% |
|
Cash ISA or Stocks and Shares ISA |
53% |
47% |
|
None of the above |
13% |
87% |
|
Why did you buy cryptocurrency? (tick all that apply) |
|
|
Low interest rates on cash |
14% |
|
The stockmarket is too risky |
3% |
|
To capitalise on digital trends |
39% |
|
I'm worried about inflation |
7% |
|
Past price performance is very good |
28% |
|
To make digital payments |
13% |
|
Other |
36% |
|
How much of your total savings and investments have you got in cryptocurrency? |
|
|
0 to 10% |
69% |
|
11% to 25% |
13% |
|
26% to 50% |
6% |
|
51% to 75% |
4% |
|
76% to 90% |
2% |
|
90%+ |
6% |
|
Approximately how much would you be willing to lose on your investment in cryptocurrency? |
|
|
None |
33% |
|
25% |
21% |
|
50% |
12% |
|
75% |
3% |
|
All of it |
30% |
