In a recent survey conducted by the Financial Conduct Authority (FCA) of the United Kingdom, it was found that some retail investors were acting on advice from unconventional and mostly unreliable sources of information when it came to investing in cryptocurrencies.
With digital tokens and cryptocurrencies taking bigger and bigger shares of the finance market, the industry has slowly crept into mainstream finance. As a result, a plethora of websites and channels have come up with a vast library of information that is available for interested investors readily.
However, many investors and crypto asset owners have only had a cursory look at how the market works and the risks involved before buying assets. When asked, many cryptocurrency owners said that they were only looking for a way to “get rich quick”, citing friends, acquaintances, social media investors and in one case, a taxi driver as motivations for buying crypto assets.
In its anecdotal survey, the FCA spoke to 31 U.K.-based individuals who owned, had owned or were considering an investment in cryptocurrency, and the regulatory body’s findings are as surprising as one might expect. The FCA said it did not publicize last names for privacy reasons.
Some highlights of the survey include:
Fred, a social-media expert from London who first heard of cryptocurrencies from a brother who had purchased some tokens previously. However, his interest in investing in cryptocurrencies wasn’t piqued until he met a taxi driver. The FCA said,
“His decision to purchase some came after talking to a taxi driver, who said he had put himself through college with profits from ‘investing’ in cryptoassets.”
Fred confirmed to the FCA that he had spent £300 ($390) in total and spread the purchases across three different cryptocurrencies, including Bitcoin (BTC). However, the predictably volatile market meant that he had lost £200 by the end of it. “Looking back I am ashamed of my investment and losing money,” Fred told the FCA.
Then there was Ashton, a 26-year-old musician and part-time spread better from a small village in the English Midlands. Ashton told the FCA he had heard stories about people becoming multimillionaires trading Bitcoin but felt he had missed the boat and instead began investing in the S&P 500.
However, it wasn’t long until temptation crept in and he began buying. The FCA said,
“After six months of poor results with Ethereum he moved all his value to XRP (Ripple), as he thought he could get better returns. In December Ripple’s value increased sharply and Ashton said his purchase was worth £150,000 ($195,000 [in] U.S. dollars).”
These are but a small sample of what many others from the survey said that echoed the same trend of a general lack of awareness about the industry.
However, Christopher Woolard, executive director of strategy and competition at the FCA, said the results can lead to better decision making by bodies that oversee this often misunderstood industry.
“This will help us ensure we are acting on evidence as we seek to protect consumers and market integrity.”