The number of UK adults who hold cryptocurrencies such as bitcoin has risen to around 2.3 million, despite warnings from regulators and the head of the Bank of England that people should be prepared to lose everything. silver.
Research by the Financial Conduct Authority also revealed that nearly 20% of buyers said they were motivated by fear of missing out, while one in seven went into the red to fund their cryptocurrency purchases.
The median holding has fallen from Â£ 260 a year ago to Â£ 300, although the highest holding reported by one respondent was Â£ 7million. At the same time, the typical profile of investors was âpredominantly male, over 35 years old and [in the] AB social grade, âFCA said.
Amid evidence that a new generation of predominantly younger DIY investors are investing their money in bitcoin, ethereum and Ripple, the FCA conducted detailed research in January that concluded that cryptocurrencies “appear to be become more standardized, “with fewer of those who invest seeing them as a gamble, and more as a legitimate alternative asset.
Looking at the top reasons people gave for investing money in bitcoin and other products, 18% responded, “I don’t want to miss out on buying cryptocurrency.”
While most people said they paid for their cryptocurrency with their own disposable income or cash, 14% said they turned to some form of borrowing – either a credit card, bank overdraft, or loan. friends, family or a financial company.
Laith Khalaf, financial analyst at investment firm AJ Bell, said the fact that buyers borrowed to buy cryptocurrency “is simply terrifying.”
He added: âFOMO [fear of missing out]â¦ Is never a good motivation for financial decisions. Buying cryptocurrency is a dangerous financial activity, and while many consumers seem to understand the risks, some play carelessly with fire.
The 2.3 million people who own cryptocurrency correspond to around 4.4% of UK adults, and are up more than a fifth from a year ago, when the figure was 1.9 million.
The FCA study found that “enthusiasm for cryptocurrencies as a commodity is increasing among crypto users”, and that two in three owners (66%) said they received positive feedback on their investment, with 11% reporting a loss.
But he also found that while the profile of the sector had improved, “the overall level of understanding has declined.”
The research comes on the heels of renewed interest in bitcoin and other digital currencies, fueled by record high prices, tweets from figures such as Tesla CEO Elon Musk, and publications influencers on sites such as Instagram and TikTok.
Some traditional institutional investors and financial services firms have entered the industry, although there have been a series of warnings from senior officials that the extreme volatility of cryptocurrencies means investors could face a erasure.
Andrew Bailey, the Governor of the Bank of England, said earlier this year that bitcoin has “no intrinsic value”, adding: “I have said several times:” Only buy bitcoin if you are ready to lose all your money ‘. “
European Central Bank regulators compared bitcoin’s meteoric rise to other financial bubbles such as ‘tulip mania’ and the South Sea bubble, while the FCA said putting money in cryptocurrency âis high riskâ¦ investors should be prepared to lose all of their money. â.
Two-thirds of cryptocurrency owners hold bitcoin, while the others most popular were Ethereum (35%), Litecoin (21%) and Ripple (18%), according to FCA research.