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In the 1800s, Americans rushed out to the West in search of gold. These days, it’s cryptocurrency (crypto for short) that’s dangling dollar signs.
Bitcoin, the largest crypto by market share, has seen an explosion in value, reaching nearly $63,600 on April 13. In the last year, its price has risen more than 800%. This may explain why the latest MagnifyMoney survey of more than 1,000 Americans found that more than 6 in 10 crypto investors believe it’ll make them rich.
We’ll highlight who’s investing in crypto, how much they’re investing and the associated risks. Amid its rising popularity, we’ll also dive into nonfungible tokens, or NFTs.
While cryptocurrency may seem “out there” to some, it’s becoming increasingly popular with Americans — especially younger ones. Our survey found that 22% of Americans currently own some form of cryptocurrency, and that percentage is higher among millennials and Gen Zers:
Why are people choosing cryptocurrency? While the majority sees it as a way to invest, a significant portion see it primarily as a source of payment or form of money.
Tendayi Kapfidze, chief economist for LendingTree said crypto buyers need to take into account their tolerance for risk.
“Crypto is very volatile,” Kapfidze said. “The risk parameters aren’t well understood. It’s more of a speculative instrument than investment.”
As a form of payment, he said it may be even riskier since its value could change drastically between the time you sign a contract and the point at which you have to pay in Bitcoin or another form of crypto.
And speaking of other crypto: Though Bitcoin is the top dog, it’s followed in popularity by Ethereum, Dogecoin and Litecoin, but not closely.
While 74% of Americans don’t own crypto and never have, it’s the older generations that appear to be the most leery.
A whopping 94% of baby boomers said they’ve never owned cryptocurrency, compared with:
There are two other important ways to look at this:
Going beyond age, gender and income, it was 2020 when they decided to dip their toes in the crypto pond. Of those who currently own or have owned crypto, 32% said 2020 was the year they first purchased it.
About half of crypto investors only began buying cryptocurrency in 2020 or 2021, while only 6% of crypto investors made their first purchase in 2015 or earlier.
Kapfidze said there were major increases in value with all types of assets in 2020, including stocks and real estate. Crypto was among those that increased, and that may have attracted a lot of new people, which then perpetuates itself upward. He said the risk is that the same will happen on the downside if people decide it’s not the great thing they think it is.
A good portion of Americans wish they acted earlier, with 46% agreeing that they regret not buying Bitcoin years ago. Still, the majority (55%) said they had no regrets.
When you get into the crypto game, Kapfidze said, can greatly influence how well you do, as the people who join late often pay the people who came early.
“It comes down to a question of where are you in the chain in terms of whether you make or lose money,” he said. “That’s the gamble you’re taking.”
Getting rich is the name of the crypto game, as 62% of crypto investors said they think it’s likely they’ll get rich off it, compared with the 18% who said it’s unlikely.
Men are the biggest believers in crypto’s potential, as 69% said they think it’s likely they’ll get rich off their investments, versus 53% of women who said the same.
But most crypto investors don’t think it’s necessarily a get-rich-quick scheme. In fact, 63% see it as a long-term investment — including 100% of baby boomers who were surveyed.
Keeping in line with that way of thinking, 50% of investors said they plan to hold their crypto and (hopefully) watch it gain value, but not everyone is on board with that.
Other top uses for crypto investments included:
About 12% of current cryptocurrency owners said they plan to spend it on gaming:
Is one approach better than the other? Kapfidze said it’s a matter of personal preference.
“Because it’s so volatile, there’s really not a lot of great ways to form your expectations around what the value will be,” Kapfidze said. “Certainly, what we’ve seen in the last year is it gaining pretty dramatically in value, and people believe it will continue to gain in value.
“But at some point, as we’ve seen in episodes in the past, it’s lost value. As an individual, you have to decide what you’re comfortable with and what portion of your net worth you’re willing to put into it. If you put a large portion in, you have to make sure you can stomach it on the downside.”
Just how much are people investing in cryptocurrency? Not a ton in most cases. In fact, 73% of those who currently own crypto have spent less than $5,000. Still, more than 1 in 10 (12%) have spent $10,000 or more on it.
To use crypto as a form of payment, some crypto owners have crypto debit cards, but the majority (62%) don’t. Of that 62%, more than 4 in 10 (41%) are thinking about getting one though.
Like losing a winning lottery ticket to a gust of wind, you may not be able to access your crypto funds if you lose your private key.
You get a certain amount of tries to input your password, but you’re out of luck if you’re wrong. And it happens. In fact, The New York Times reported in January that (according to data from Chainalysis) about $140 billion worth of Bitcoin was apparently lost or in stranded wallets.
So, it’s a bit concerning that of those surveyed, 32% said they don’t have the private key written down somewhere.
Those who buy crypto tend to be a bit skeptical about its security in general. More than 7 in 10 (73%) of crypto owners said they’re concerned with their crypto disappearing.
Beyond losing your crypto key, another risk of using crypto may be angering your partner. The risk is real, too, as 71% of consumers with a significant other said they’d be mad if their partner spent money on cryptocurrency or NFTs.
However, the majority of that group would be OK with them spending a smaller amount on it:
While a lack of trust in crypto is the biggest reason people cite for not buying it (35%), others seem baffled by it. Another 32% said they wouldn’t know where to start and 24% said it’s too confusing.
That doesn’t mean they’re dead set against it though. Nearly 3 in 10 who’ve never invested in cryptocurrency would consider doing so at some point.
Willingness decreases with age, however, as 40% of Gen Zers who don’t invest in crypto would consider it, compared with:
NFTs are essentially digital proof of ownership and authenticity of digital collectible items, such as video art, original memes, tweets and virtual trading cards. They’re not extremely popular at this point, but perhaps more so than you might think — particularly with younger generations.
They’re also slightly more popular with men (17%) than women (14%).
The reasons people said they purchase NFTs varied:
Because each NFT is unique, Kapfidze said their value depends on how many others are interested in them.
As many of them are related to art, he compares NFTs to collecting art. Most art doesn’t appreciate in value significantly, but a few key pieces may, which is why art collectors often have large portfolios with hopes that those that gain value will make up for those that lose value.
Of course, you don’t know that in advance, so it’s a game of odds. Kapfdize said that may be one way to approach NFTs — buying them in large numbers to try to mitigate risk.
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MagnifyMoney commissioned Qualtrics to field an online survey of 1,048 Americans, conducted March 18-24, 2021. The survey was administered using a non-probability-based sample, and quotas were used to ensure the sample base represented the overall population. All responses were reviewed by researchers for quality control.
We defined generations as the following ages in 2021:
While the survey also included consumers from the silent generation (defined as those 76 and older), the sample size was too small to include findings related to that group in the generational breakdowns.
The “Find a Financial Advisor” links contained in this article will direct you to webpages devoted to MagnifyMoney Advisor (“MMA”). After completing a brief questionnaire, you will be matched with certain financial advisers who participate in MMA’s referral program, which may or may not include the investment advisers discussed.