New research into the attitudes of high-net-worth investors towards digital assets from Matrixport, and produced by FT Longitude, the specialist research and content marketing division of the Financial Times Group, finds that those aged under 54 are much more interested in investing in the asset class compared to older age groups. They are willing to experiment, take more risks and thrive on the excitement created in the online communities of Reddit, Telegram and Discord. These findings resonate with public information compiled by wealth-X that wealthy people with an interest in crypto are almost seven years younger on average than the general wealthy population.
Who are the young crypto-hungry investors?
A closer look at the published data shows us that a majority of individuals with a crypto focus created their own wealth (90%) and have an entrepreneurial mindset. These individuals include the founders or investors of crypto-related businesses such as Ethereum's founder Vitalik Buterin and wealthy individuals with a general interest in crypto such as Elon Musk.
These self-made wealthy individuals appear to be more open to investing in assets such as crypto, which are riskier and more volatile than other asset classes. It’s a trend that is expected to continue, with the international wealth community predominately made up of entrepreneurs who have made their wealth themselves without relying on inheritance (84%).
A new generation turning away from traditional finance
Our research found that disillusionment with traditional finance is the leading factor motivating 18–25s to invest in digital assets. Interestingly, a roughly equal amount said that traditional finance players getting involved in crypto would discourage them from investing more, despite this factor being regarded positively by the rest of the investors in other age profiles. As children of the post-2008 crash landscape, this group feels a keen disadvantage in the traditional financial order, which they see as being rigged against them.
Young investors are drawn in by the appeal of crypto
Crypto’s appeal for young investors lies in a desire and ability to experiment without traditional finance intermediaries. They are the most likely to adopt high-risk strategies in digital assets investing and, in contrast to older investors, young respondents are also more likely to appreciate crypto’s lawlessness.
Within the 18–25s age group in the Private Wealth in Digital Assets 2022 research:
- 64 per cent say they have invested without knowing what they were doing, compared with just 10 per cent of over 65s.
- 58 per cent – far more than any other group – say that regulatory changes have made it more difficult to access the digital assets market in the last 12 months.
Young investors seeking quick rewards
While disillusionment and financial pressures are underlying motivators pushing investors into crypto, in the latest bubble many young investors were attracted by the potential of massive pay-offs.
Younger people are more likely to be concentrated in the most speculative parts of this asset class: NFTs and altcoins. This reflects the nature of the market when these young investors flooded in — a period of hypergrowth that saw the number of digital assets explode.
“I think the hardest thing at the time was that there are so many things to invest in, that you wonder how much of it is a scam,” says one high-net-worth investor. This led to wild gambles sometimes paying off, without the need to do research. “I'm more interested in the potential for price rises, rather than excited about new coins or new technology,” adds another high-net-worth investor.
This speculative trend has driven investors to new sources of information via digital channels. Digital channels help to drive engagement but they can also fuel hype bubbles. “A lot of people are using Discord, and you can very quickly get overwhelmed with a lot of opinions,” says a high-net-worth investor. Rather than investing, “they see it more as… spending the weekend at the races.” And of all age groups, the 18–25s are most likely to be motivated to invest by a recommendation through their personal network (35 per cent).
Appetite is strongest in Asia
Momentum is growing in Singapore and Hong Kong
The study, which engaged with 1,500 investors in Singapore, Hong Kong, Taiwan, Australia and UK, found Singaporeans dominate the 18-25s group (see Figure two). This reflects the country’s huge appetite for crypto which has become the second most popular asset for investors after stocks, according to research conducted by advertising firm BBH Singapore.
This is in spite of the Monetary Authority of Singapore (MAS) doubling down on consumer protection for retail investors when it comes to the digital assets. Hong Kong came second to Singapore, chiming with research from Visa which found Hong Kongers to be some of the world’s biggest investors in crypto. The territory is also moving forward with its own Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF) laws right now.
The future of digital assets looks bright
The shocks of the most recent market crash have undermined speculative investment strategies that are purely hype-based. As incoming regulation and growing technological maturity help to stabilise the market, the days of quick rewards may not last. “I think that is something we are going to look back on as transient,” says Adam Goldberg, Co-founder of Standard Crypto. “Rather than something that is underlying the crypto market structure.”
Nonetheless, young investors remain committed to this asset class that will shape the future of investing. Among the 18–25 year olds in the research, 53 per cent expect 75–100 per cent of their portfolio to be invested in digital assets within the next three years — far higher than in any other age group. About half of respondents say they expect that most assets in the future will be digital.
As we emerge from the current crypto downturn, longer-term strategies that are based on the underlying value of the asset class are likely to flourish — thanks in part to the commitment of a new breed of investors.