AJ Bell has warned of a “significant misunderstanding” of the risks around investing in cryptocurrencies.
Research from the investment platform has revealed that 58% of cryptocurrency investors in the UK do not have an ISA, while 53% do not have a pension.
The findings also suggested that almost a quarter (23%) of all crypto investors do not have any traditional savings or investments.
AJ Bell’s study, based on a survey of 1,134 cryptocurrency holders on 20 January, found that 30% of crypto investors are not willing to lose any of the money they’ve invested, while only one in four crypto investors would be willing to lose 75% or more of their investment.
The research showed that only one in five investors (21%) would be willing to lose their entire investment, and the investment platform suggested this indicates cryptocurrency investors “lack an appreciation” of the potential downside of their investment.
AJ Bell’s research comes just a month after the FCA issued a warning to retail consumers over investing in cryptoassets that promise high returns.
Financial analyst at AJ Bell, Laith Khalaf, suggested the research revealed a “number of concerning findings”.
“Not only are many consumers buying cryptocurrencies without having an ISA, pension, or savings account in place, there also seems to be a significant misunderstanding of the risks involved,” Khalaf said.
“Only one in four cryptocurrency investors would be willing to lose 75% or more of their investment, which is not beyond the bounds of possibility, given the volatility of the asset class. Indeed, in January the FCA warned consumers that they should be willing to lose all of their money if investing in cryptoassets.
“The unpredictability of the future of cryptocurrencies means putting money into Bitcoin is more speculation than investment. In 10 years’ time, it’s possible the price of Bitcoin will be significantly higher than it is now, it’s also possible it will be close to worthless. It’s such a new and evolving market that no one can predict with any confidence which one of these scenarios, or any in between, might prevail.”
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