The financial watchdog of the United Kingdom Financial Conduct Authority (FCA) has published research findings on cryptocurrency investors.
In the study done by international strategy consultancy company BrainThinks for the UK government, most crypto investors are a younger, more diverse group of investors who are not prudent in their financial choices.
Crypto High Returns Appealing To Younger Investors
The study polled a reported 517 participants between August 2020 to Jan. 2021. Participants regarded themselves as self-directed and self-taught, and none of them sought professional advice in making their investment choices.
When asked about the guiding principles behind their investments, the polled respondents said emotions and thrill of investing played a pivotal role in their investments. 38% of the polled investors admitted that challenge, novelty, and competition were more appealing than more conventional and logical reasons like saving for retirement.
40% said they didn’t see losing their money as the risk inherent in investing in volatile assets like cryptocurrencies. 78% of them rely on their gut instincts when making investment decisions, with some reportedly admitting that they know the investment vehicles they consider a “safe bet.”
But despite this indifferent approach to their finances, 59% admit that a significant loss could adversely affect their present and future lifestyle.
Sheldon Mills, Executive Director, Consumer and Competition at the FCA, said there was a need for this eccentric group of young investors to be encouraged to save and invest for life events. Mills said investors should channel their money to investment products that are suitable for their level of risk.
The research findings also pointed out an interesting trend, noting that most of those interviewed were females under 40 and from a Black American background. The research also showed that this group of investors rely more on contemporary media channels like YouTube and social media to learn all they can about the instruments they are investing their money on. This trend shift is attributable to the rise of mobile investment apps online, the research notes.
The FCA says this research was made public, so companies looking to tackle investor harm in the market may gain valuable insights.
FCA Launches Program To Tackle Investor Harm
The rise of social media has created an interconnected community that makes information easier to get, but the fallout has raised many concerns among government officials.
The FCA publication notes that mainstream media and ads play a negative role in educating investors on hedging their investments.
In this light, the regulatory agency announced a digital disruption campaign to prevent investor harm. The FCA says it will be using online adverts to disrupt investors’ user journeys and redirect them to their homepage, where investors will be asked key questions.