Many investors may not know much about how cryptocurrency works, but they know they want it, according to a new report.
Cryptocurrencies in January represented 13% of the average investor's portfolio compared to 3.8% a year earlier, according to a report by consumer data company Cardify, based on analysis of transaction data. Cryptocurrency deposits grew by 10 times in that period, compared to 2.6 times for retail investing fueled by new investors who account for 41.5% of all cryptocurrency deposits, up from 14.8% in November.
The popularity, and the price, of digital currency appears to be outpacing knowledge of how it works: Only 16.9% of those polled in a February Cardify survey of 750 cryptocurrency investors reported having a strong understanding of crypto. So many investors have gotten on the crypto train that the value of Bitcoin, the granddaddy of all cryptocurrencies, rose 81% since Jan. 1. On Wednesday, it broke the $50,000 price barrier, the same day the Cardify report was released.
More and more mainstream players are getting in the game. PayPal started to accept bitcoin transactions in October and BNY Mellon announced a leap into the cryptocurrency market last week. Earlier this year, electric car manufacturer Tesla revealed that it had invested $1.5 billion in Bitcoin and plans to accept it as a form of payment for products in the near future. Even traditional investment banks like Goldman Sachs are wondering if it’s time to start treating Bitcoin as a kind of “digital gold” to store value.
Cryptocurrency ownership currently skews young, 76% being 34 or younger according to Cardify, but that might change. Just as older generations have adopted online shopping and streaming this year, they might also jump on the crypto bandwagon, said Mike Novogratz, founder of Galaxy Digital, a crypto financial services company, and former hedge fund manager and Goldman Sachs partner, in an interview this week with his former employer.
“Demand from baby boomers has potential to be a significant tailwind for bitcoin in 2021 as private wealth managers launch bitcoin funds,” Novogratz said. “In my view, it’s not a matter of will it happen, it’s a matter of when it will happen.”