Investors love Crypto. I am not one of them. Maybe I am just stupid. Or Ignorant. Or both.
In 14 years, Crypto assets have become the second-most popular investment. Let’s put that in perspective. Physical cash has been around for over 2 thousand years. The stock market has been around for about 250 years and bonds were created over 4,000 years ago.
So, it has been successful. Very successful in fact.
My concern is not the asset itself. It’s because most who invest in it believe Crypto is the be all or end all. It’s not.
There’s another issue. Experts tell us that when we spread our investments around we do better financially. Just read one of my articles a few weeks back regarding my disastrous investment and you will understand why spreading it about is necessary. Most investors in crypto have no other investment asset class or crypto represents a major part of their investment portfolio.
And most who have invested in Crypto don’t seem to know how risky they are.
ASIC thinks it is so risky it requires regulation. Crikey. I was not expecting that.
A recent ASIC survey found more than one in four investors included crypto assets in their portfolios but just one in five considered the activity to be “risky”.
Of 1,053 retail investors surveyed, 44 per cent held Crypto Of those who held it one-quarter said it was their only investment.
There’s more. A significant number surveyed reported investing in unregulated, volatile crypto-asset products with only 20% considering it ‘risk-taking’.
All investments are risky. Including investment properties, the share market, bonds, cash and yes, crypto.
ASIC is concerned that there are limited protections for crypto-asset investments given they have become increasingly mainstream and are heavily advertised and promoted. It seems anyone can promote them including celebrities.
Matt Damon promoted Bitcoin (dropped 60%), The backstreet boys promoted Safemoon token (dropped 99%). Mike Tyson’s NFT have fallen 95% and Reece Witherspoon’s World of Women NFT is down ‘only’ 75%.
They will all survive financially but those ordinary people who have put all their money in these assets based on their promotions may not.
The research also showed more than half of new investors were aged 18–34 and many were prompted by a fear of missing out. One-third said they used Google to research their investments while more than four out of 10 relied on YouTube, Facebook, podcasts or financial influencers.
Here is why it is worrying. If you start young and invest in stable investments, you are likely to build a reasonable portfolio in time for retirement. If on the other hand you decide to invest all your money in risky investments, and they fall, there will not be enough time to build it up again because the growth you compound in the early years disappears.
The basis of the blog? Yes, Crypto maybe should be part of a portfolio and that is why I am probably stupid or ignorant or both. But if it makes up a significant part of your portfolio it might be worth rethinking.