The 2022 Definitive Guide to Crypto Investing
Executive Summary:
Unprecedented crypto volatility, new crypto legislation, and a growing willingness to take on risk, mark key signs of the cryptocurrency market’s maturity. These trends have upped the ante for investors who have become more accepting of the industry’s twists and turns, but more thirsty for its returns. While crypto used to be the anti-currency, clearly investors see this as a continued gold mine.
So what’s next for crypto investors?
In this definitive guide to crypto investing, more than 1000 American retail investors share the state of their crypto investments and shed light as to their challenges and drivers for continued industry growth.
Crypto Investors reveal:
- How they’re approaching major changes like market volatility and legal/tax changes
- The changing expectations of risks and rewards – earnings and losses through the market volatility
- The newest hope for improved returns in these markets as people come to tap other sources of information – beyond traditional investment advisors and social media, to leverage hedge-fund-like technologies
INTRODUCTION
As years of covid, stimulus checks, furloughed workers and out-sized volatility and returns characterized 2021, it’s time to look at the investing trends that are now playing out in the crypto investing world.
With continued spurring of the blockchain and crypto projects, the market soared to more than 3 trillion market cap, and key coins like Bitcoin gained 70% over the year. This, despite the sting of the late Q4 ‘winter’ that erased a few months of growth.
So, while news cycles and hype cycles might focus on the last tweet or coin launch, this definitive survey comes to lay out key trends in crypto investing that have evolved over the course of the last year and that are setting the stage for quite a different 2022.
KEY TAKEAWAYS
- Crypto appeal is fast growing, particularly among investor novices, augmenting/replacing stock investments
- Crypto appeal is rooted in returns -moving away from idealism.
- Challenges with crypto are the volatility, specifically the timing of when to get in and out of trades
- Appetite for returns continues to grow as investors become more familiar
- Investors continue to invest more than negligible risk capital, seeing crypto as a core asset class
- Investment advisory services are giving way to new technologies and sources of advice
- Institutional technologies like automation and Artificial Intelligence are the new frontier for effective crypto investing.
- Retail investors have started adopting automation and algorithms and have seen powerful returns
SURVEY METHODOLOGY
The survey was done through an online panel of more than 1000 Americans the week of February 14th, 2022. The survey was conducted through anonymized polling and captured insights from a representative sample of both crypto investors and non-investors. Further questions were brought to a later over-sample of investors to allow for further exploration of crypto subjects. It has a margin error of 2% with a confidence level of 95%. The survey represented various levels of age, gender and investment background.
CRYPTO INVESTING CONTINUES TO GAIN POPULARITY
60 MILLION AMERICANS TRADE CRYPTO
More than 60 Million Americans have invested in Crypto. With an adult population of 330 million in the United States, and crypto penetration reaching 18%, it means that there are now 60 million investors in crypto. That is even more remarkable given the legal and regulatory questions that surround this asset class. Yet still, Americans have already voted to become active in this new asset class.
Number/% of Americans who have invested in Crypto
CRYPTO IS STILL MALE DOMINATED
Male participation rates out-strip female participation rates by more than 2:1, with 25% of males over 18 saying they have participated in Crypto markets, compared to only 11% of women. This continues a global trend that is often cited that shows that crypto currencies continue to be male dominated. This is in -step with previous reports, Male penetration much higher than female.
Percentage of men and women who have invested in crypto
YOUNGER INVESTORS ARE 3X MORE LIKELY TO INVEST IN CRYPTO
Penetration continues to be stronger amongst the newer generation with nearly 1 in 3 investors between the age of 18 and 29 saying they have invested in crypto. This penetration is nearly twice the national average, while those age 46+ are still just toeing into the crypto waters.
That said, investors who are 46+ (who represent huge amounts of savings and wealth), now represent a significant crypto force. As of this survey, a full 1 in 10 now have some crypto assets.
Percentage of each age group that have invested in crypto
CRYPTO INVESTING IS ALREADY MAINSTREAM
35% of those who are invested in crypto, think that crypto investing is already the norm. Furthermore, 45% believe that 2022 will be the year where it truly becomes mainstream. Surprisingly, only 21% of those in it, still feel that they are well-ahead of the market – thinking that it will only become mainstream in 2023 or later.
When Crypto will become ‘mainstream’
Surprisingly, even for those that are not in it, they still think that crypto investing is already mainstream. A whopping 70% think that crypto investing is either already mainstream, or will become so in the next year.
Percentage of Americans that think crypto is mainstream now
Those that are not invested in it, are 43% more likely than those that are in it, to think that crypto mainstreaming is at least a year away. And are 3x more likely to think that crypto is many years away or will never become mainstream.
How non Crypto investors see Crypto adoption
People Invest in Crypto for the Returns
While there are many more fundamental reasons that drive the crypto growth, the predominant motivation for crypto is to make money.
58% of investors cite this as the main reason they are active in this market. The social amplifications that have surrounded the crypto market growth have become contagious and have pushed others to seek profits the same way.
Main reason Americans invest in Crypto
35% of investors have more fundamental, idealistic beliefs that anchor their investments. Believing in the underpinning technologies and the way they are used to streamline, simplify transactions. To note – the positive beliefs of ‘believing in decentralized finance’ outweigh the reactionary sentiments of ‘not liking traditional finance bureaucracy and costs’ 5:1. This points to people’s shift of perception of crypto from a rejection to a powerful platform for new financial opportunities.
The Future of DeFi vs Anti-Traditional Finance
Expectations for Earnings: More
Given the majority of investors seek returns in the crypto market, what is considered a strong return? How much money do they expect?
The initial answers seem to be anchored to traditional investments. The degree of relativism. People move into crypto markets with expectations to out-perform other investment categories.
For sake of comparison, consumers believe that their current investment categories can deliver up to 20% returns. (this does not mean that they actually DO deliver that, but that is the conventional wisdom). These returns are seen as strong returns in traditional markets like stocks and commodities and so people are looking to make MORE than in those markets.
In short, they want to ‘level up’ their returns.
Nearly half of investors are looking for returns between 20-50%. There is an equal number of investors who are seeking out-sized returns (of more than 50%, and who would be content with returns of up to 20%. To note, only 6% of investors expect 100% + returns from crypto markets
Expected Crypto Return
(in %)
Investors are Equally Interested in Earning in USD as BTC
Given the choice, investors are split at 47% for earning in USD and BTC. Another 4% would like to earn ETH and others. This seems to note that while investors are generally interested in returns, an equal number see that earning in crypto offers them continued earning potential as the category continues to mature.
In what currency do Americans want their returns?
Non-Crypto Investors Have Lower Expectations
Those who have not yet started to invest in crypto have more sober expectations of results. They are 51% more likely to be happy with ‘up to 20%’ returns. It appears to be that one an investor has seen, or experienced the highs and lows – the volatility of the crypto market, their appetite for larger earnings becomes dominant.
Are you happy with returns of up to 20%
Despite the Bull/Bear, Most People are Breakeven or Better
What were your crypto returns last year
While the S&P gained 28% in 2021, Bitcoin gained 70% in 2021. This means that even basic HODL strategies would have made significant returns. However, the emotional roller coaster has made it such that more than half of investors (51%) are only about breakeven, or have lost money. It can be that trade timing, emotional decisions or worse could have impacted a great number of investors.
On the other hand, nearly half (47%) of investors made returns of between 50-200%. This correlates strongly with the leading coins, while 2% made more than 200% returns!
Interesting to note, that Bitcoin’s performance also outperformed commodities like gold in 2021 – that lost 8% that year.
One important consideration of these results is that the element of timing and volatility of buying and selling really dictate the trading results. Empirically, the timing of trades seems to be hurting people’s return as their ‘intuition’ is causing them to underperform market benchmarks.
Does Investor Motivation Impact Returns?
It’s noteworthy that those whose primary motivation for investing in crypto stems from a “dislike of traditional financial bureaucracy and cost’ are 60% more likely to have lost more than 50% of their money in 2021.
Dislike of traditional finance correlates with worse crypto returns
This points to a growth point for as crypto has stopped being a place for anti finance, and has come to take on its own life as high valuable financial market.
Moreover, those that have entered with the express purpose to ‘make money’ are 43% more likely to have made upwards of 50% in 2021 than those that came in as a reaction to traditional financial markets.
Motivated to make money correlates with higher returns
Investors Don’t Just Feel the Water, They Are Knee Deep
$ Amount invested in Crypto
Crypto investments are beyond novelties. Only 20% of investors have toe’d into the water with ‘experimental’ money of up to $1k. The vast majority of investors have moved into thousands (45% up to $10k) and another 31% with more than $10k, up to $100k. This represents not a small investment range, but a much more focused investment strategy.
More remarkably, younger investors (18-29) are 44% more likely to invest between $1 and $10k in crypto than older generations (46-60) – despite their relatively limited savings. Incredibly, this continues with investments of between $10k and $100k, with them 42% more likely to have invested this sum of money, than their peers that are double their age!
These statistics point to a remarkable trend.
Firstly, people still have much of their newfound wealth, stimulus checks, risk capital in crypto. Secondly, they seem to continue to up their investments quickly having tasted early opportunity of returns (whether realized or not), with more than a third of investors having more than $10k in their accounts.
Lastly, it appears that the taste of success seems to be driving younger people to expand their crypto portfolios much faster than older, more ‘stable’ investor generations.
Crypto Represents a Big Part of Portfolio
Percentage of investments in Crypto
Once investors have overcome their investing inertia, the excitement, worry of crypto volatility and returns tend to quickly drive up investment levels. Traditional estimations of having ‘only 2%’ of your portfolio in high risk, high reward asset classes have seem to be thrown by the way side.
Clearly the risk capital component of people’s portfolio is growing quicker than most advisors might think.
For those that cited their primary motivation for investing in crypto as being a resentment of traditional finances, bureaucracy and costs, they are 3x more likely to have more than 20% of their portfolio in crypto assets.
Buy/Sell Timing is The Most Difficult Part
The top 2 issues cited by investors in successfully trading crypto markets are simply when to buy and when to sell. While simplistic, the aspect of timing plays an out-sized role in crypto investing given both the market volatility and the social awareness of movements surrounding the digital assets. The timing of trades is a constant discussion as people feel like they get in or out before the next peak,trough and are leaving money on the table.
Its important to note that which coin to buy is a lesser issue at 43% (though growing in the face of new coin launches) while transparency of markets is a non issue for most investors – with only 9% of investors citing this as a challenge.
Key challenges investing crypto
Volatility and Security Are Top Risks
From amongst the crypto investors, the single risk that investors have identified is market volatility risk. A full 75% of investors find that this is the most dangerous risk to manage. Interestingly, crypto’s early security issues still remain a risk for many. As ecosystems security and issue of custody combine to form a risk for 68% of investors. Other risks, like legal and fees were not mentioned as significant risks.
Top risks cited in investing in crypto
For those who are not yet in the crypto market, they cite the inability to withdraw money as a risk 3x more than those who are in the market
Challenge of withdrawing crypto
Crypto Investors are New Investors or Stock Investors
Overall crypto investors are also stock investors, but are also active in foreign exchange trading and some degree of commodity trading.
What other asset classes do you invest in?
There is an interesting phenomenon where younger investors 18-29 may have side stepped traditional investments altogether to join the world of crypto. Many of them have bypassed traditional investment vehicles and advisors, instead, seeking to move directly into their own self-directed crypto investments. This ‘youth movement’ points to a macro trend that might call traditional, ‘calculated’ investment vehicles into question for an entire generation.
Is there still a role for an investment Advisor?
While in 2020, only 38% of Americans said they had an investment advisor, crypto investors are 21% more likely to have an investment advisor. From verbatims, it is apparent that the definition of investment advisor has broadened and for many, no longer limited to those with certain accreditations.
Investment advisor certifications like CFP (Certified Financial Planner), CFA (Chartered Financial Analyst), and ChFC (Chartered Financial Consultant) and CPA (Certified Public Accountant) seem to be less of a sought after designation among younger investors particularly as they use more accessible and ‘crowd rated’ investment advisors that are available on social media channels like youtube, telegram and instagram.
Amongst those that invested in crypto as a reaction to traditional finance, they are 2.8x less likely to have a financial advisor than the average investor.
Crypto Investors Have Bigger Goals
Traditional investment discussions often center around savings and investment goals. “Are people saving for a vacation or looking to buy a home? Are they investing for a goal like early retirement? These imply that investors are looking to either protect their savings or grow new financial income streams.
Crypto investors have different expectations: 24% are looking to “step-change their financial horizon”. They see that crypto investing can change their trajectory, not just ensure it continues.
That is the new investment goal for crypto investors – making money to step-change financial horizons.
What are your crypto investing goals?
Institutions Have the Investment Edge vs. Retail Investors
79% of people believe that banks, institutions, and hedge funds have access to technologies that give them an advantage vs. retail investors. This may continue the anti ‘establishment’ vector that underpins original crypto investment, but it is remarkable to see that even among those that are solely seeking financial return, this sentiment is true. Retail investors feel that hedge funds have a competitive advantage over them.
Do Banks & Hedge Funds have a Technological Edge of Retail Investors?
Additionally, those hedge funds are known for being successful, for limited high-net-worth individuals (HNWI) and are able to deliver high returns over time thanks to using advanced technology.
Hedge Funds are Known to Be…
Growing Awareness of Advanced Institutional Tools
Algorithmic investing is a familiar concept for 85% of investors, however only 37% of those who have heard of it, have tried it.
Are you familiar with Algorithmic Investing?
94% of Investors That Have Tried Algorithmic Trading, Have Been Successful
Have you been successful with Algorithmic investing’?
94.5% of Those Who have Tried Algorithmic Investing Have been successful
A remarkable 15:1 ratio have been successful. This indicates that new tools offer new opportunities for success to help make retail investors more successful.
So while previously, tools have been for banks and institutions, investors that have heard and tried algorithmic trading have had remarkably strong trading results.
87% Trust AI To Improve Crypto Results
While generally less available than algorithmic trading tools, artificial intelligence is believed to be another strong tool in improving investing results. It’s value stems from the heavy use of the jargon amongst institutions that often cite it as a reason for their strong investing results.
Now, retail investors are also thirsting for this new technology.
Can AI improve crypto returns?
Crypto Investors Are Already ‘Automating’
As crypto markets hum 24/7, investors have already started to bring more advanced tools to help them manage the endless opportunities of the market. 66% of crypto traders have already tried some automation for their trading.
Are you currently using automation in investing?
Summary: Investors Seek Institutional Tools Improve Crypto Returns
To meet the expectations of today’s crypto hungry investors, they have begun to adopt many advanced technologies to improve their trading discipline and success in these volatile markets. Particularly, retail investors have started to adopt automated trading solutions that provide for instant execution of trades on their account with certainty and discipline.
Additionally, investors are looking to understand the power of algorithms and AI to capture and manage market volatility and inform timeliness of trading. Through services like EndoTech, hundreds of thousands of investors have found they can tap the power of institutional grade solutions to capture the potential of crypto markets.
Investors that EndoTech services cite:
- Results that far outperform manual HODL benchmarks
- Diversification benefits to enable varied asset and risk management
- Automated trade execution and discipline to capture 24/7 trading windows
- 100% maintenance of account custody
