Recently the UK Financial Conduct Authority shared their “Cryptoasset Consumer Research,” that was their 2nd annual survey in which they assess behaviors in the industry. Despite crypto investors being a small fraction of the population, the data shows increasing interest in the sector compared to previous years.
Financial Conduct Authority
The UK FCA released their “Cryptoasset Consumer Research” last month, which was their second annual survey to gauge crypto behaviors. The research by FCA is important because it helps the regulatory body support its decision-making in industries like cryptocurrency and blockchain. Going back to 2019, research sourced by the FCA was based on the feedback from 2,132 UK consumers. In this year’s research, the FCA stated that they were able to assess a much larger group of crypto holders. Despite the exact sample size not being disclosed, the Conduct Authority mentioned that a larger sample size helped them better assess consumer behavior and build off last years sentiment. While amassing all this information on crypto holders, the FCA has been in direct contact with the Bank of England, including the “Cryptoassets Taskforce.”
It’s widely known that the amount of investors in digital assets is still extremely low. On a global scale it’s difficult to project that number, but the research by FCA can give us a better idea. According to the report, it’s estimated that 3.86% of the population in the UK is owning cryptocurrency. The report estimates that that population in the UK ( over 18 years old ) is right around 50 million. With this being said, it’s projected that about 1.9 million adults have allocated cryptocurrency to their investment portfolios. On a statistical basis, this was 2.35% higher than the results from 2019. With the global economy taking a big hit from COVID-19, it’s impressive to see the increasing interest in digital assets. In an environment where investors were taking a “risk-off” approach, the report mentioned that most investors were fully aware of volatility involved.
Compared to 2019, some other important metrics included:
- 27% of people never heard of cryptocurrency in 2020, compared to 58% in 2019
- 92% understood the definition of cryptocurrency
- 77% could provide names of 3+ different crypto assets
- 90% have engaged in research prior to buying cryptocurrencies
As we take a look at the progress since 2019, it’s evident that the industry knowledge is continuing to expand. Despite investors representing a small fraction of the global population, adoption and interest is growing. Even though crypto seems to be a slow maturing industry, the market has seen similar adoption curves in other macro shifts ( internet, cell phones, ect..).
Arguing Against Store of Value
For a while now, the market has been arguing over the use cases surrounding Bitcoin. Aside from store of value, investors have even gone as far as labeling Bitcoin a “safe haven asset.” Bitcoin is still one of the best performing assets of 2020 despite global turmoil. On the flip side, Bitcoin has also been highly correlated to traditional markets since January which has raised some concerns. Visionary Financial still labels Bitcoin as a “speculative asset” with tremendous potential upside. According to the recent report by the FCA, it also seems like investors have similar thoughts. Almost 50% of investors were viewing cryptocurrency in a speculative manner. This is tremendously different from the “store of value” or “global hedge” narratives that many have read into. When asked the top 5 reasons for purchasing cryptocurrencies, investors stated that:
- 47% – “As a gamble that could make or lose money”
- 25%- “As part of a wider investment portfolio”
- 22% – “I don’t want to miss out on buying cryptocurrencies”
- 17% – “As part of my long-term savings plan”
- 17% – “for a political choice/ideological reason”
The recent report by the FCA further supports the theory that cryptocurrency continues to gain traction despite unprecedented times in 2020. With the digital asset industry still being in its infancy, research shows that investors are still on-boarding crypto assets for speculative reasons opposed to macro reasons. With this being said, data in 2020 was impressive on a year-over-year basis, and goes to show how behavior is shifting within the industry. If the FCA continues to conduct research next year, it will be interesting to see the progression that is accomplished after battling COVID19 and other economical concerns. Right now data further explains that investors are still engaging in crypto from a speculative point of view, opposed to a defensive point of view. This mindset also explains the high correlation between bitcoin and traditional markets for most of this year, while trying to navigate a global pandemic and historic unemployment metrics.
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