As Bitcoin drove higher to reach a peak of $64,000 back in April, many investors were piling in to perhaps become millionaires overnight. However, many of those investors had no clue what they were getting into, and many of those have either sold or have diversified into certain meme cryptos that (it could certainly be argued) have little chance of succeeding.
The Independent published an article this morning, that included data from behavioural finance specialists Oxford Risk. The data suggested that around 36% of UK investors had "non-existent, or poor” understanding of digital assets when they bought their cryptocurrencies.
In addition, these investors made little effort to improve their knowledge of the cryptocurrencies once they had purchased them. The data here suggests that practically a quarter of the investors knew nothing, not only about the cryptocurrencies they had purchased, but the crypto sector as a whole.
Greg B Davies, head of behavioural finance at Oxford Risk expressed his concerns:
“The concern is that too many people are buying blind without knowing what they’re doing and are being influenced to invest by rising prices and other people encouraging them to have a go. That is worrying if people have substantial amounts invested in cryptos and do not understand what they have bought.”
Things aren’t getting any easier for these investors. Many might well have sold at a loss, given the sharp downward movement of the crypto market over the last couple of months.
In addition, many new investors have been attracted by the spate of meme coins and other such cryptocurrencies that have very little in the way of fundamentals about them. The fact that Elon Musk has tweeted about the odd one or two of them doesn’t make them a solid buy, beyond pure speculation.
However, it might be less of a concern that the data points to only 5% of investors putting in an amount equal to or greater than £10,000. The vast majority of new investors tend to only put in small amounts, with half of them spending £500 or less. A dabble is not a major concern.
Nevertheless, it could be argued that the average investor will almost certainly be back. Central banks continue to print fiat currencies with reckless abandon, destroying the purchasing power of the average Joe, and particularly affecting anyone who has savings in the bank.
Bitcoin especially, was created as a hedge against the excesses of the banking system. Even though the volatility of such a young asset will instil fear and perhaps mistrust among those uneducated about crypto assets, it still provides one of the only ways out of the current, financial policy induced mess we are in.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.