The UK Financial Conduct Authority (FCA) has just revealed the results of a qualitative and quantitative comprehensive research pertaining to the behavior of Cryptocurrency investors. The findings show that 70% of Crypto investors have a ‘get rich quick’ incentive which has ‘potential harm’ to their financial portfolio.
The risk factor of relying on expected bull cycles as a basis of investing is that these affected investors fail to research before buying and therefore end up acquiring Digital Tokens that they know very little about.
Instead, the only source of information that these Crypto buyers rely on is cited from social media influencers, friends, and acquaintances.
The Results Of The Study
The sample size was 2,132 consumers. Findings show that more than 70% of the respondents do not understand the principles of Digital Tokens. These consumers are only motivated to make orders based on the likelihoods of bull cycle gains. Some experts compare this category of investors to gamblers.
However, 8% of the consumers interviewed were found out to have conducted in-depth research of the Crypto asset they were purchasing, prior to placing orders. This is the ideal investment approach that the FCA is recommending.
Lastly, there is a 16% of Crypto consumers that make purchases without even knowing the very basic details of the Digital Tokens such as the team behind the project, price fluctuations, the technology behind the Token, etc.
There Are Concerns About Market Volatilities
The FCA discovered that over 50% of the respondents are deeply concerned about the bearish cycle that has eroded the value of their investment. However, there is an 8% of respondents that have no idea whether their Cryptocurrencies have depreciated or appreciated in value.
It is vital to also note that in regards to the volatility issues, 30% of the respondents have diverse portfolios of Crypto assets to cushion themselves from losses. 18% of all the interviewees noted that they are after quick rewards.
Despite the volatilities and the risks, 62% of the respondents believe that Crypto markets are an alternative to mainstream finance. Another 11% said that they bought Cryptos as an alternative to buying stocks or other financial instruments. 8% confided that they are long-term-oriented and view the investments as pensions.
Meanwhile, 31% believe that it is normal to have market volatilities since all investments are risky. Another 30$ say that they sometimes avoided investing for fear of losing while 16% say that they avoid investing for lack of money.
The Study Is Complementing Information On Earlier Findings
The ‘potential harm’ of consumers treating Crypto assets as avenues to quick riches was also unearthed by a joint study by the FCA, Bank of England, and HM Treasury in October 2018. This report was used as a basis for setting a UK regulatory and policy approach to DLT and Cryptos. The aim is to prevent financial crime and protect consumers from shocks.
The study also found out that 30% of UK residents have heard of Cryptos and only 3% have invested. Hence, as the PM Theresa May negotiates Brexit, this is one of the areas that the government can use to prop up the economy as it has untapped potential.