Crypto Risk Drops
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Crypto Risk Drops: US Investors Show Caution
US investors are becoming increasingly cautious about investing in Bitcoin (BTC), with a significant drop in risk-taking behavior, according to a recent study by the Financial Industry Regulatory Authority (FINRA). The study found that the percentage of crypto investors remained unchanged at 27% between 2021 and 2024, but the number of investors considering purchasing more or buying for the first time decreased to 26% in 2024 from 33% in 2021.
Investor Risk Appetite Declines
The industry regulator reported a four percentage point drop in investors with high levels of investment risk, from 12% to 8% between 2021 and 2024. The biggest decline was seen among investors under 35, with a nine percentage point drop to 15%. This shift in investor behavior may be attributed to the current economic uncertainty, with investors opting for safer assets amidst concerns over interest rates, inflation, and the economy.
Crypto Perceived as Risky but Essential for Financial Goals
FINRA’s study, conducted between July and December 2024, surveyed 2,861 US investors and 25,539 adults. The results showed that 66% of respondents viewed crypto as a risky investment, up from 58% in 2021. However, a third of investors believed that taking big risks was necessary to achieve their financial goals, with 50% of respondents under 35 sharing this sentiment. Additionally, 13% of investors reported purchasing meme stocks and other viral investments.
Blockchain and Crypto Adoption
The study’s findings highlight the importance of blockchain technology and crypto in achieving financial goals. Despite the perceived risks, crypto remains a key tool for investors, particularly among younger generations. The survey also found that 13% of investors, including nearly one-third of individuals under 25, had purchased meme stocks and other viral investments.
Pace of New Investors Slows
The pace of new investors entering the market has also declined compared to 2021. Only 8% of investors reported entering the market in the last two years, down from 21% in 2021. This decline may be attributed to the end of the pandemic, which saw a surge of younger investors entering the market. According to the study, the share of US adults under 35 who invest has returned to 2018 levels.
Market Implications and Future Outlook
The decline in risk-taking behavior and the perceived risks associated with crypto may have significant implications for the market. As investors become more cautious, the demand for crypto may decrease, leading to a potential decline in prices. However, this trend may also lead to a more stable and mature market, with investors taking a more informed and nuanced approach to crypto investments. From a retail investor perspective, this shift may be seen as an opportunity to enter the market at a lower risk, as the hype and speculation surrounding crypto begin to subside. As the market continues to evolve, it will be essential to monitor the changing attitudes and behaviors of investors, particularly among younger generations, to understand the future of crypto adoption and its potential impact on the broader financial landscape.
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image source: cointelegraph.com