Cryptocurrency becoming mainstream, but investors are still wary

Crypto currency is becoming mainstream, but investors are still wary of investing all they have into the digital currency according to new research on the behaviour and attitudes towards crypto currency. Investment numbers are high, but the value of these investments is low.

Luno, a global crypto currency exchange, estimates that 15% of South Africans own cryptocurrency, the second-highest percentage in the world.  Everyone is talking about cryptocurrency and it is often a topic of discussion when people get together.

There will often be a story about someone who made it big in cryptocurrency, but people are also very wary to put their hard-earned money into something they do not know enough about. They are also suspicious about the fact that what Elon Musk says can make a cryptocurrency such as Bitcoin increase in value or fall right to the bottom.

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Official currency or scam?

Interest in crypto has also been piqued by El Salvador in South America becoming the first country in the world to recognise it as a legal way to pay.

Scams where people are invited to “invest” in Bitcoin, just to lose all their money when the scheme collapses, have also made people think twice about trading in cryptocurrency, although these schemes never invest the money, but simply use it to pay returns for older members, turning it into a Ponzi scheme.

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What the research shows

The research on the crypto boom was done by market research agency Kaufmann, Levin and Associates (KLA) via its YouView panel of consumers and delivered these insightful results:

• 25% of participants said they own cryptocurrency to the value of R100 to R1 000
• 13% own crypto to the value of R1,001 to R10 000
• 6% own crypto to the value of R10 001 to R50,000
• 3% own crypto worth more than R50,000 in value
• 36% are keen to invest in crypto in the future.

However, while the percentage of South Africans who own crypto is high, the amount invested is low which indicates that the bulk of South African crypto investors are experimenting and dabbling, without making a significant financial commitment, Tessa Nowosenetz from KLA says.

She believes that this means that many people are ‘crypto-curious’ and interested in learning the ropes while engaging in trial runs.

“Crypto curiosity stems from the perception that crypto offers a quick gain for those investing, without needing deep knowledge or much understanding of the category.”

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Why people invest in crypto

People have various reasons for investing in crypto:

• 43% of the participants said their main reason for interest is the perception that there is an opportunity to make considerable gains on their investment in the short-term
• 20% said it allows them to diversify their investments or portfolio
• 16% said it is easy and accessible and that everyone can do it if they have a smartphone, a bank account and some money
• 8% said it is an exciting currency to invest in
• 4% said they like it because it can be sent it to people in other countries
• 4% liked crypto because it is not regulated
• 3% of the respondents believe they are cool and trendy and it offers something to talk about with friends and family.

“However, despite being willing to invest and having an interest in making considerable gains in the short term, many actually do not seem to understand the details, workings and value of crypto, with 44% saying that their main concern around the digital currency is that they do not understand some element of it or how it works,” Nowosenetz says.

The research identified a typical ‘investor’ mindset of a consumer willing to take a risk to make a quick buck, despite lacking in knowledge or an understanding of how it works. On the other side there are also 17% of the participants who said they do not have any cryptocurrency and are not planning on buying any.

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Why some people do not like to invest in crypto

Nowosenetz says when these people were asked what is stopping people from investing in crypto or investing more in crypto, just more than a third felt that they prefer to invest, or invest more, in formal and regulated financial products or with formal or regulated financial service providers.

Just under a quarter of the participants felt that they do not know or understand enough to invest or invest more in crypto, showing that lack of knowledge makes people pull back from the category or from investing much more than their R100 to R1 000. Other results showed that 11% of participants feel it is too risky and that the bubble could burst at any time and they may lose too much money, while 10% said they do not trust crypto currency.

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Crypto enthusiasm

Although general interest is widespread, ‘crypto enthusiasts’ represent a small number. Nowosenetz says while numbers are small, there are those who exhibit hyper-passionate attitudes towards crypto, with 13% saying that they invest in crypto and nothing is stopping them and 8% saying that not having enough disposable income is the only thing that is holding them back from investing more in crypto.

“From the data, we certainly see that there are high levels of interest amongst South Africans in the category in general. If people start to feel more educated and banks and regulators climb on board, South Africans may be even more convinced and interest and confidence may continue to grow.”