The Typical Crypto Investor
Most people have a certain cliché in mind when they think about cryptocurrency investors. According to that cliché, the average crypto investor is young and male. He lives in a big city and works at a prestigious job, probably in finance or technology. He’s unmarried and childless, and he pulls in a hefty salary. He may or may not be wearing a designer watch and a designer suit.
Is there any truth to that image? Sure – in the same way as there’s a little bit of truth in many stereotypes. There are plenty of wealthy, single young professional men who invest in cryptocurrency and who do very well for themselves. But today, as more and more people are learning about how the digital asset works, crypto investors are a more diverse group than most people realize. This article will take a closer look at crypto demographics and at what kinds of trends are on the horizon in this huge market.
Crypto Ownership
Gemini’s 2021 State of US Crypto Report gives an interesting snapshot of today’s crypto investors.
Most owners of digital currency are male, relatively young, and affluent. The average owner is a 38-year-old man who earns upward of $110,000 a year. 74% of crypto holders in the United States are men, and 77% of them are under the age of 45.
Additionally, Gemini found that 71% of crypto investors are white. Just 13% are Latino, and 9% are African American. Another 10% are Asian Americans or Pacific Islanders. Those demographics mirror the demographics of taxable investment holders, which also skew white and affluent.
Shifting Crypto Demographics
As the crypto market grows, more Americans say they plan to invest in the virtual currency soon, perhaps within the next 12 months. The new cohort of prospective investors identified by Gemini’s survey is far more diverse than the current set of crypto holders.
53% of the prospective investors who spoke to Gemini are women, and 35% live in a small town or in a rural area. The prospective investors’ average income is a bit lower than that of current crypto investors, although still high at $107,000. Nearly half of them are over the age of 45.
There are other indicators that older Americans are interested in crypto and may eventually lead to a major demographic shift. Even the AARP has cautiously endorsed investment in virtual currency in several of its online publications.
An Inflection Point for Crypto Investing
Rightly or wrongly, many investment firms formerly classified cryptocurrency trading as a form of speculation. Today, thanks in part to a more robust regulatory framework and greater availability of products, financial analysts like Morgan Stanley are redefining crypto as an investable asset class.
Analysts point to 2020 as an inflection point, as there was a widespread devaluation of fiat currencies and also a greater public interest in digital wallets and no-touch spending.
2020 was also the year that PayPal began allowing its users to buy Bitcoin using its apps. In the same year, Mastercard announced that it would allow its customers to pay merchants using Bitcoin, and a Visa-backed credit card began offering Bitcoin rewards. The result has been a far greater level of public awareness when it comes to virtual currency.
Institutional Investors
In a 2020 survey carried out by Fidelity, the overwhelming majority (80%) of institutional investors said they were interested in digital assets. 36% said that they were already invested in crypto, and 60% said that the assets should have a place in their investment portfolio.
Most of those surveyed said they liked the fact that the asset is uncorrelated to other asset classes and that it is based on innovative technology. Respondents also said that digital currency has a high potential for upside.
Blackrock, the world’s largest asset manager, has filed documents signaling its plans to invest in crypto futures. Wall Street investment firms like Paul Tudor Jones and Stanley Druckenmiller have invested in Bitcoin. Mass Mutual, MicroStrategy, and Square have also bought cryptocurrency and are driving public confidence in the asset forward.
Digital Gold
Portfolio managers have often compared Bitcoin to “digital gold” because the asset is decentralized and comes in a limited supply. The creator of Bitcoin, Satoshi Nakomoto, designed Bitcoin with a built-in scarcity; the upper limit for the coin’s supply is 21 million. That scarcity, coupled with the increased demand for the asset, is a big part of why Bitcoin’s price keeps marching upward.
Crypto also wins plaudits for being a deflationary asset. Unlike other alternative asset classes, crypto is safe and easy to store, and it can be moved easily as well. Qualities like these are winning over converts to crypto investing and are likely to push the asset class further into the mainstream, leading to increased diversity in the demographics of crypto investors.
Worldwide, the jump in crypto investors since 2020 has been staggering. Statista reports that there were 101 million cryptocurrency asset holders in 2020, up from 35 million in 2018 and 18 million in 2017. That number looks poised to keep on rising as an ever-broader swath of investors learns more about the digital asset.
Crypto and Pension Funds
Not surprisingly, several major pension funds have already added crypto startups to their portfolios, and say they intend to invest directly into virtual currencies in the future. In 2019, two pension funds in Fairfax, Virginia decided to invest in the Morgan Creek Blockchain Opportunities Fund. The pension funds in question manage retirement assets for Virginia’s state police force and for other state employees.
Also in 2019, the Hong Kong-based asset manager Legacy Trust created a pension plan backed by cryptocurrencies as well as traditional assets. Legacy’s staff said they had noticed an increased appetite for investment in crypto, and they were confident that the new pension fund would be popular with people around the world.
Education and Crypto Investing
People tend to be anxious about the unknown, and cryptocurrency is no exception to that rule. Inevitably, as investors learn more about how the digital asset works, that early uncertainty turns into anticipation. Today, more investors are recognizing crypto’s enormous potential as a way to diversify their IRA and hedge against inflation.
If you’d like to learn more about crypto investing, visit our website or call Coin IRA today to speak to one of our digital asset specialists.