Investor profile on crypto investment dynamics

What is the profile of people who invest in cryptocurrencies? In a Harvard Business School study, it appears that people who invest in cryptocurrencies have, on average, higher incomes, live in wealthier areas, are on average more educated, are risk-lovers, widely use credit cards, and often tend to overdrafts, that is, they take advantage of leverage when it is provided to them. Generally, they are people who are attracted by the prospect of potentially higher returns that aggressive cryptocurrency trading can offer compared to more conservative traditional investments in other types of financial products.

In terms of their financial status, according to the study, 60% of crypto transactions are made by investors who earn more than $75,000, while those who earn $45,000 or slightly less account for 20% of transactions. In this new market that investors activate with medium to high incomes and relatively good education, what is required more and more is that this market should become more and more understandable to the merit background of these investors.

What it seems, according to the study, is that people are increasingly adopting cryptocurrencies as a medium of exchange. This means that more and more companies will have to start accepting cryptocurrencies as a form of payment. The study suggests that cryptocurrency investing has entered the mainstream, meaning businesses are likely to see more consumer demand to spend using cryptocurrencies instead of conventional currencies.

Another interesting point of the study is that even though the correlation between cryptocurrencies and other assets has increased over time, crypto investors still see investing in crypto as a hedge against inflation. This is because the prevailing view in the investment community is that cryptocurrencies, specifically Bitcoin, protect against inflation. After all, they are not subject to the decisions of a government or central bank and have a limited supply schedule that makes Bitcoin look like digital gold.

Despite this, according to the study, investors more often do not stay in crypto investments for a long time, as they seem more willing to cash out of crypto investments much earlier than traditional investments, a sign that confirms that the investors in the crypto market are much more willing to take on higher risks with potentially faster and higher returns than other investments.

However, although the market is considered speculative, it is now much more mature and big than most people think. It is a market that, according to the study, although investors do not invest in it more than 3% of their deposits and 6% of their expenses, this market in November 2021 had a capitalization of close to 3 trillion dollars, while today the capitalization is close to 1.2 trillion dollars, an amount that is not insignificant at all. Crypto's size has led it to be at the centre of regulators exploring ways to boost the fledgling market's transparency.

Today the crypto market is an established new reality in global investment and trading. The more transparency is enhanced, the more the relatively small stakes of investors in this market will increase. Remember, according to the study, investors do not invest more than 3% of their deposits and 6% of their expenses in the crypto market. Even a relatively small boost in their portfolio exposure to this market would not make a big difference to their overall portfolios' exposure; however, it would create an enhanced momentum in the crypto industry and potentially high returns to crypto investors.