Most crypto traders invest only in crypto: Survey

A new survey conducted by cryptocurrency exchange Huobi found that most crypto traders do not invest in other assets.

The results of the survey taken by 491 Huobi customers reveals that only one-third of retail crypto traders invest in stocks and just 8% of them hold fixed income products like bonds. Furthermore, just about a quarter of the polled crypto investors has invested in other assets such as real estate, investment funds and forex. The research concludes:

“Cryptocurrencies are the predominant asset class for this investor segment.”

Jay Hao — the CEO of Huobi’s competitor and leading crypto derivatives exchange OKEx — told Modern Consensus via Telegram that part of the reason why crypto traders do not invest in traditional assets is that they are mostly “young millennials and Gen-Z.” He explained that “for many of them, cryptocurrency was the first thing that they invested in and remains the only thing for several reasons.” He continued:

“They are comfortable navigating these markets and enjoy the fast-paced action, the opportunity for gains, and the strong community that has built up around crypto. There are also far fewer barriers to investment in crypto than in many traditional markets and normally far greater volatility making cryptocurrency trading exciting and appealing.”

Overlap will grow

While this study’s data may lead people to think that crypto investors have little overlap with traditional investors, previous reports suggest that this may be caused by the market segment polled by Huobi—which is only composed of retail traders. Hao cited the increasing concern among traditional investors and traders over the ongoing economic turmoil which pushes them towards Bitcoin.

As Modern Consensus reported at the end of last year, a survey conducted by financial services giant State Street Corporation revealed that 94% of the 101 large asset managers and owners either have digital assets under management or are planning to add them in 2020.

Hao is of the opinion that the overlap between traditional investors and crypto investors will increase in the future and that “it is already beginning to happen as we see sectors like DeFi and projects like Synthetix giving investors exposure to traditional asset classes.” 

He also pointed out that traditional markets are displaying an increased volatility due to the pandemic, the economic situation, and the U.S. presidential elections.

This increase in volatility, Hao explained, makes those assets “more attractive to crypto investors who can now begin to speculate on these markets through vehicles that they are already very familiar with.“ He concluded:

“As the blockchain space and DeFi economy grow, we will start to see more real world assets moving to the blockchain and a sea change in the way traditional markets are traded. It’s going to be very exciting to watch and see just how big—and how fast—the overlap between traditional market traders and crypto traders becomes.”

New to investing

The survey also showed that—on average—retail crypto traders are new to investing with 78% having at least one year of experience, but only about 20% having five or more. 

Huobi said that age did not appear to be a big factor in crypto traders’ lack of previous investing experience, with 73% of the respondents between 26 and 50 years old.

While 34% of the retail trader that answered the survey’s question prefer to trade and manage their own digital asset portfolio, the report suggests that “many are interested in a diverse range of crypto investment vehicles, especially interest-bearing products with fixed or flexible terms.” 

This is not a surprising revelation, given how successful decentralized finance, or DeFi, yield farming is among crypto investors, who show interest in obtaining fixed income on these investments.

Emerging traders

Another interesting detail that resurfaced from the survey’s answer is that 54% of crypto retail traders have an annual income of $10,000 or lower. Furthermore, only 13% of them earn more than $50,000 per year. Of course, that reflects the wide diversity of crypto traders surveyed, which included respondents  located in emerging markets across Europe, Asia, Africa, and South America.

Also, those investors use a big portion of their income to finance their crypto trading activities, with 49% of them planning to invest 10% to 30% of their annual income in crypto assets. Almost one-fourth of those retail traders plan to allocate more than 30% of their income to cryptocurrency-related activities.

A less surprising detail shown in the report is that most retail crypto asset investments are short term, with the exception of bitcoin and ether purchases favored by hodlers. As much as 55% of retail traders invest in digital assets with plans to hold them for less than a year, while only 13% invest with hopes to keep the tokens for more than four years.