• FCA estimates 2.3 million UK adults hold cryptocurrency in its latest consumer research paper
• 14% have borrowed to invest
• The average holding is £300
• Crypto owners tend to have higher incomes
• Gambling, FOMO, and replacing stockmarket investments all play a part in driving crypto purchases
Laith Khalaf, financial analyst at AJ Bell, comments:
“The FCA’s latest research on crypto paints a broadly positive picture and shows most consumers are using crypto sensibly and moderately. The average holding value is just £300 and those who have bought crypto tend to be further up the income scale, which means they have greater capacity to sustain losses. A high proportion of consumers recognise cryptocurrency is a gamble and a growing number are using it as part of a wider investment portfolio, which indicates they understand the risks and how to mitigate them.
“However, there is a dark underbelly lurking in the figures, which suggests there is still potential for widespread consumer harm. The fact that 14% of crypto buyers have borrowed to invest is simply terrifying. The extreme volatility and uncertain long-term outlook for crypto means holdings can be wiped out, leaving borrowers with nothing but their debt as a memento. Around one in five crypto buyers said they were driven by FOMO, which is never a good motivation for financial decisions. A similar proportion said they were buying crypto instead of shares or other investments, which suggests some consumers are leapfrogging traditional assets which can help to build long term wealth.
“Buying cryptocurrency is a dangerous financial activity and while many consumers appear to understand the risks, some are carelessly playing with fire. There is no clear path for cryptocurrency to achieve widespread acceptance as a means of exchange between consumers and businesses and the carbon footprint of crypto mining has further dented its credentials as a long-term alternative to the existing monetary system.”
