‘Young’ traders are investing in Bitcoin for the ‘thrill’, and FCA is worried

It is often perceived that crypto trading and investing are more popular among millennials. To add to this, a top regulator in UK published new research to better understand such investors. Calling crypto trading “high-risk investments,” Financial Conduct Authority (FCA) found that its consumers are “younger” and a “more diverse group. ” 

This survey stated that nearly two-thirds (59%) claimed that investment loss would have a “fundamental impact on their current or future lifestyle.” Key reasons for respondents’ investment decisions stem from “enjoying the thrill of investing,” and social factors like the “status that comes from a sense of ownership.” 

Additionally, 38% of those surveyed did not list a “single functional reason for investing in their top 3.” The report stated: 

This is particularly true for those investing in high-risk products for whom the challenge, competition, and novelty are more important than conventional, more functional reasons for investing like wanting to make their money work harder or save for their retirement. 

FCA conducted the research along with a consultancy ‘BritainThinks’ that surveyed 517 “self-directed investors” from August 2020 – January 2021. Close to 218 were interviewed, out of which some were 45-64 years old, while 53 respondents were between the ages 18-29. About 166 people were aged 30-44. 

“Investors often have high confidence and claimed knowledge,” FCA claimed and found a lack of awareness and “belief” “in the risks of investing.” Over 4 in 10 did not view “losing some money” as one of the risks of investing. The agency highlighted that investors can lose “more than they initially invested” via contract for difference investments, for example. 

According to FCA, these investors have “a strong reliance on gut instinct” and “rules of thumb.” Almost 78% agreed “I trust my instincts to tell me when it’s time to buy and to sell” and four in five admitted that “there are certain investment types, sectors or companies I consider a ‘safe bet’”.

The research further indicated that this new group of “self-investors” is more reliant on social media for tips and news. Adding to that, Sheldon Mills who is the Executive Director, Consumer and Competition at FCA was worried that some investors are being tempted – “often through online adverts or high-pressure sales tactics” – into buying “higher-risk products that are very unlikely to be suitable for them.”

Meanwhile, crypto investors continue to grow; Crypto.com estimated last month, that there was a 15.7% increase in the global crypto population, in January alone. Overall, there are 106 million global crypto users as of January 2021. At the same time, trading platform Robinhood reportedly gained six million new clients for its crypto app.