Cryptocurrency: a risky investment for individuals

Crypto-investors now outnumber equity holders. Most individuals who invest in crypto-currencies say they are willing to assume risk to boost the performance of their portfolio, not to diversify it.

Nearly one in 10 French people are cryptocurrency holders

Cryptocurrency could soon become commonplace. According to a survey conducted by Ipsos on behalf of the Association for the Development of Digital Assets (Adan), in 2021, 8% of French people said they had already invested in cryptocurrencies, compared with 3% in 2020. Of these holders, over 60% launched less than 3 years ago, particularly in 2019 and during the confinement.

There are several reasons for this interest in cryptos:

Unsurprisingly, the majority of retail investors in cryptocurrencies turn to bitcoin (49%). This is followed by ether (29%) and bitcoin cash (28%). More specifically, the survey reveals that 69% of investors are prepared to trust bitcoin, compared with 14% for ether.

A high-risk investment

Last March, Pricewaterhouse Coopers (PWC) published a study whose purpose was to analyze the behavior of 77,000 customers of the SwissQuote bank, which enabled retail investors to invest in cryptos back in 2017.

The study shows that investors have focused more on crypto-currencies than on monitoring the equities in their portfolios. Aware that these assets present a high risk, they say they are willing to take them on to boost their portfolio's performance.

The results of the study also show that the annual performance of the composite portfolio of crypto holders has almost doubled, to 11.2%, compared with 6.7% for those who have not invested. However, the risks associated with this investment should not be underestimated.

In return for this performance, investors faced portfolio volatility of around 31%. So, while the surge in bitcoin and ether prices may have seemed impressive over the 2017-2020 period, these assets also had a dark year that caused investors heavy losses.

Adrenalin-seeking investors

The study published by PWC highlights another lesson: retail investors in cryptocurrencies very often log on to their platform to monitor the performance of their portfolio. It has to be said that, unlike equities, this market is open 24/7. These habits can lead crypto-investors to change their opinions more often and speculate in the short term.

The health crisis has led to the emergence of a new generation of investors willing to take major market risks and in search of thrills.