UK Crypto Ownership Soars but Financial Advisers Shun Asset Class

IFA cryptoassets UK

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Interest in Bitcoin and cryptocurrencies is at an all-time high in the UK, according to a new report which states 2.3 million adults are now holders.

The seemingly insatiable appetite for crypto was revealed in research by the Financial Conduct Authority.

It comes as a separate study shows the vast majority of UK financial advisers would not recommend digital currency to clients.

The amount of crypto people hold (or HODL) has also increased, from an average of £260 in 2020 to £300 in 2021, possibly driven by Government Covid-19 support payments.

The person most likely to hold crypto in the UK is male, aged over 35 and in the top social grade – AB.

IFAs overwhelmingly negative about crypto investments

Despite this surging interest, an Opinium poll of more than 200 Independent Financial Advisers (IFAs) show than more than 90% have a negative view of cryptocurrency.

This is despite more than a third saying that they are fielding an increasing number of cryptocurrency-related queries from their clients.

According to a report in IFA Magazine, 93% wouldn’t recommend cryptocurrencies and 95% wouldn’t recommend meme stocks, such as GameStop and AMC Entertainment Holdings.

However, looking to the future, a sizeable proportion of the IFAs surveyed said that in time cryptocurrency is likely to become a legitimate investment.

Key takeaways also include:

  • 91% of IFAs would be concerned if a client was to invest in crypto. This varies depending on the size of the client’s portfolio, with concern the greatest when it exceeds £200,000.
  • 14% of IFAs have received enquiries about meme stocks from clients.
  • 33% believe cryptocurrencies will become a legitimate investment class over time.

Alexa Nightingale, research director at Opinium, told the magazine there is “clearly uncertainty and concern” in the financial adviser industry about cryptocurrency investments.

However, she acknowledged that crypto and related investment products “is becoming more mainstream”.

Related post: Do I need an accountant or financial adviser to help with my cryptoassets?

FOMO is driving people to buy cryptocurrency

According to the FCA report, the surge in crypto investing is partially driven by a fear of missing out, or FOMO, with 20% of buyers admitting this was their main motivation.

It states that investors are seeing cryptocurrency as a more normalised form of investment, rather than a gamble.

Worryingly, the report highlighted a certain section of investors who were taking on debt to fund their purchase, and that understanding of crypto, and the potential risks had fallen.

Other key points from the FCA report:

  • Crypto ownership has risen from 1.9 million to 2.3 million adults.
  • 78% of adults have heard of cryptocurrencies.
  • 38% of investors regard crypto as a gamble, compared to 47% a year ago.

Crypto ‘hodlers’ plan to double down on their investment

Most investors use a cryptocurrency exchange to buy their coins, with some 29% of holders checking their balance daily.

Confidence is also high amongst holders, with around half saying they plan to buy more crypto and that they expect to make a profit over time.

Stablecoins left many investors cold, with 46% saying that they are unclear about the benefits of this type of crypto.

Bitcoin was by far the most recognisable cryptocurrency, with Bitcoin Cash second and Ethereum third.

However, in terms of ownership, while Bitcoin held the number one spot, Ethereum was the next most popular, followed by Litecoin.

While most people were cagey about how much crypto they held, in 2020 the highest reported holding was £30,000. However, in the latest survey it was £7 million.

Most people who were aware of crypto but had not bought any said they were aware they would have no financial protection, such as the Financial Services Compensation Scheme, if they did invest.

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Disclaimer: This article is for informational purposes only and does not constitute financial or investment advice.

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