21% of UK crypto investors say they know almost nothing about it

A new survey by online brokerage comparison site Finder shows that 21% of UK crypto investors think they know a lot about digital currency and blockchain, but when asked to list the top five things they learned from reading about crypto, they could only name one.

The blockchain is a public ledger of all cryptocurrency transactions. Although the technology behind it is complex, and often misunderstood, it’s difficult to deny its potential. In the legal world, the blockchain is being used to build smart contracts, which enable the exchange of goods and services between parties with absolute security and transparency. In the field of finance, it’s being used for peer-to-peer trading and direct investment. In the tech world, it’s being used to develop new applications and protocols.

A new study paints a bleak picture of the motivation, knowledge and awareness of UK cryptocurrency investors when it comes to their investments.

Almost two in five (36%) small crypto investors in the country admitted that their understanding of the sector was poor or non-existent when they made their first investment. Over time, 21% of cryptocurrency investors still rate their knowledge of the sector as low.

The survey was conducted by Oxford Risk, a commercial software development company specializing in products for asset managers and financial services firms.

Although the sample is small – just 1,038 respondents – it has been weighted to reflect the demographic profile of the UK.

In addition to the low awareness of cryptocurrencies in investments, the study found that demand for digital assets is driven by FOMO (fear of missing out). Some 35% of respondents said they had read a lot about the rapid rise in the price of cryptocurrencies, while 15% said they had been encouraged by friends or family to invest in the sector. Greg B Davies, head of behavioural finance at Oxford Risk, said:

The problem is that too many people buy blindly without knowing what they are doing and are influenced by rising prices and other people urging them to invest. It’s disturbing that people invest large sums of money in cryptocurrencies and don’t realize what they’ve bought.

A significant minority are also still uncertain about the future of the market, with 45% saying they do not know if prices will continue to rise, 32% saying they are not sure and 24% saying they firmly believe they will. Nevertheless, 21% of those surveyed plan to buy cryptocurrencies for the first time this year or expand their current holdings.

Remarkably, most investors put relatively small amounts into the sector, with 81% saying they only bought a small amount of cryptocurrency to see what would happen, 76% investing less than 5% or less of their total savings, and 41% investing less than 1%. However, 7% of investors have invested up to 20% of their total assets in cryptocurrencies, and 10% more than 10%.

By June 2021, 2.3 million UK adults owned crypto assets, up from 1.9 million last year, according to a recent study by the Financial Services Authority. In addition to the increase in investors, the FCA noted that the median share value has increased from £260 ($370) in 2020 to £300 ($420) in 2020.

This growth has been accompanied by an increase in awareness, with 78% of UK adults saying they have heard of cryptocurrencies, a further increase from 73% the previous year. Like Oxford Risk, the FCA has also noted a significant drop in understanding of cryptocurrencies, which also suggests that many consumers do not understand the technology and the sector.

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