The number of people aged 45 or younger who own cryptoassets has doubled in a year, new findings have revealed, raising fears that many have invested their money in a risky sector they know little about.
While the number of people turning to cryptoassets to try and increase their returns is growing rapidly, the proportion of people aged 45 or younger who currently own them has grown from 6% to 12% in just 12 months.
Among people over the age of 45, ownership of cryptoassets increased from 2% to 3% over the period, according to Boring Money.
Seven percent of the UK’s adult population now hold some form of crypto-asset, and a further 3 percent say they have held cryptocurrencies in the past.
Forty-three percent of crypto-asset investors said they checked their account balance on mobile, up from 36% a year ago, while 19% said they bought or sold through a mobile app.
According to the data, one in five of the total retail investor population in the UK is made up of individuals with less than three years of investing experience.
For young investors, the influence of those around them was an important incentive to open their first account. As many as 40% of the youngest investors, aged 18-24, say a friend or family member encouraged them to open their first investment product.
Findings from Boring Money also revealed that on average those with cash savings but no investments now hold £17,000, up from £14,600 a year ago, and 30% now have more than £10,000 in Reserve.
He added: “At the same time, there is also a significant proportion of individuals investing in funds and stocks despite having relatively modest cash reserves in place.”
“Figures show that 27% of people investing today have less than £10,000 in cash and investment assets, with the majority of this group being young adults.”
Holly Mackay, Managing Director of Boring Money, said: “There is a ‘Book End’ effect in the DIY investing market today.”
“At one end we have millions of people in cash, with large balances and no investments.
“At the other end, we have relatively inexperienced, mostly younger, investors who hold extremely volatile assets.
“There is a more natural middle ground for millions of people, and providers need to find answers on how to move more customers to this more comfortable middle ground.”
Crypto-assets pose a ‘threat to global financial stability’, FSB warns
The rapidly changing popularity of crypto-assets poses a “potential threat to global financial stability”, new findings from the Financial Stability Board warn.
Threats posed by unbacked crypto-assets like bitcoin, stablecoins, and decentralized finance (DeFi) could “escalate rapidly,” underscoring the need for timely and preventative policy action worldwide, the FSB says .
While crypto-assets like bitcoin remain a small part of the financial system, data gaps make it difficult to gauge their full utilization and many investors don’t fully understand what they’re buying, according to the findings.
“If the current trajectory of growth in scale and interconnectedness of crypto-assets with these institutions were to continue, it could have implications for global financial stability,” the FSB said.
Regulators are increasingly concerned about how a meltdown in crypto-assets, which are typically highly volatile and still largely opaque, would ripple through the broader financial sector.
Data: 60-day rolling correlation of bitcoin with other financial assets
Last May, a sharp decline in the price of bitcoin and etherum on China’s tightened restrictions on crypto led yields on benchmark US and German government bonds to plummet as investors dumped digital tokens in favor of of “safe haven” assets.
Bank of England Deputy Governor Jon Cunliffe said in October that a crash in cryptocurrencies was a “plausible scenario.”
Decentralized finance, an offshoot of crypto, is also rising on the FSB’s agenda. It allows users to lend, borrow, and save in cryptocurrencies while bypassing traditional financial gatekeepers like banks and exchanges.
Statistics: Market capitalization of crypto-assets, according to the FSB
DeFi has grown in popularity during the pandemic as rock-bottom interest rates drive investors to seek yield. DeFi has become a magnet for scams and other crimes, posing additional challenges for regulators.
“Without sufficient regulation and market oversight, DeFi and related platforms could pose risks to financial stability,” the FSB said.
Robert Ophele, chairman of the French Securities Supervisory Authority, said last week that regulators were behind the times and that the FSB could have its first global framework for stablecoins and digital asset service providers. a few months from now.
The FSB does not have the power to impose binding rules, but its members undertake to transform the agreed principles into national rules.
The European Union has approved a new law aimed at regulating crypto-asset markets, but regulators say a comprehensive approach is also needed given the cross-border nature of the sector.
Conventional finance such as big banks and hedge funds are also increasingly getting involved in the sector, as well as derivatives that reference crypto-assets in complex investment strategies, the FSB said.
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