The study, conducted by London-based investment firm IW Capital, reveals that only five per cent of British crypto investors realise profit, and only 38 per cent of the general population have any understanding of cryptocurrency, or the underlying technology. But despite this, a full third of survey respondents believe that the price of bitcoin is a bubble set to burst.
Lack of education
The data comes from a nationally representative sample of 2,007 respondents and shows a range of misconceptions around both the technology and the investment potential.
In the words of IW capital, “the data reveals that, fundamentally, Brits do not have enough information or knowledge on the topic of cryptocurrency. In fact, many have no knowledge about the subject whatsoever.
Despite a widespread dearth of knowledge surrounding this particular asset class, disconcertingly, 1 in 20 Brits – nearly 3 million – have invested in cryptocurrency without fully understanding it, with only 5 per cent having taken advice from a financial adviser when investing in cryptocurrencies.”
According to the survey, the majority of British investors see cryptocurrency as an inferior investment choice, with only 7 percent of respondents seeing more value in cryptocurrencies than investment opportunities offered by traditional markets, like stocks or government bonds.
This reflects similar findings from a poll conducted in the U.S. by Wells Fargo/Gallup, which found that while 26 percent of Americans were intrigued by investing in crypto, only two per cent had bit the bullet.
The Wells Fargo/Gallup poll, however, also noted the part that age plays in people’s investment decisions, finding that younger investors without a large investment portfolio were more likely to be educated about and own bitcoin.
While 48 percent of investors between the ages of 18 and 49 either knew about or owned bitcoin, the same figure was only 22 percent for investors between the ages of 50 and 64.
Trading at a loss
In a market that has offered unprecedented returns over the last few years, that only 5 percent of investors have managed to find profits might be surprising. This is likely influenced by the timing of the survey—coming at the tail end of a parabolic price rise.
As bitcoin hit all time highs in late December 2017, the hype generated by media exposure sucked in waves of otherwise ignorant investors—only to face a difficult decision several weeks later as the price swung against them.
Due to its global, decentralised nature, those choosing to invest in cryptocurrency at such a time were subject to no scrutiny—with none of the regulation and investor protection that investors in traditional markets must negotiate.
Commenting on the survey, IW Capital CEO Luke Davis said that the statistics were “shocking, but not surprising” adding that, “although a positive appetite for alternative finance remains, to see that investments have been made without proper financial advice and a lack of facts and education is very concerning.”
Such skepticism has come to be expected from traditional financial firms, but despite the worrying nature of the statistics, they are not unique to cryptocurrency markets.
Although crypto might offer more volatility than most, the crypto market landscape shares fundamental characteristics with other investment markets. For example, the figures of losses are not wildly different from Forex—where new traders would often be better off flipping a coin—or the stock market, where, according to science, 95% of all traders fail.
Through the ages, amateur trading and investing has led to countless tales of monetary losses—most deriving from the human capacity to make decisions based on emotions, rather than research or tried-and-tested methods.
In both the trading and investment worlds, this story plays out time and time again, making the profitable day trader a statistical anomaly, and leading the average individual investor to underperform the market index by 1.5 percent.