Young traders treat crypto investing like a ‘competition,’ FCA says

Casino chips decorated with bitcoin logos.

Andrei Rudakov | Bloomberg | Getty Images

LONDON – The vast majority of traders under the age of 40 invest in cryptocurrencies and other “high-risk” assets due to a sense of “competition” with friends and family, according to research published by the UK’s Financial Services watchdog on Wednesday.

A survey by the Financial Conduct Authority found that three-quarters of young investors are motivated by competitiveness when putting their money into cryptocurrency or other high-risk products such as foreign exchange or crowdfunding.

Meanwhile, 68% of respondents compared investing in such assets to gambling, according to the Financial Conduct Authority (FCA). The regulator says the results were the result of surveys of 1,000 participants between the ages of 18 and 40 who had invested in one or more high-risk investment products.

More than half (58%) of respondents said they were motivated to make a high-risk investment after hearing about it in the news or social media, according to the Financial Conduct Authority (FCA).

Bitcoin is currently approaching all-time highs after it topped $60,000 last week. The world’s largest cryptocurrency is known to be incredibly volatile, dropping from over $64,000 in April to less than $30,000 in July. Its price has more than doubled so far this year.

Despite Bitcoin supporters touting a long-term means of accumulating wealth, the Financial Conduct Authority (FCA) found that only 21% of those under the age of 40 in the UK said they were considering holding their most recent investment for more than a year.

“We’re seeing more people chasing higher returns. But higher returns can mean higher risks,” said Sarah Pritchard, executive director of markets at FCA.

“We want to give consumers more confidence to invest and help them do it safely, and understand the level of risk involved.”

The regulator says it has enlisted the help of BMX gold medalist Charlotte Worthington in a campaign warning of the dangers of investing in risky assets.

It comes after the Financial Conduct Authority (FCA) warned earlier this year that a “new, younger and more diverse group of consumers” was engaging in high-risk investments, citing the rise of online trading apps as one possible reason.

Amateur investors have piled into the stock market this year, using platforms like Robinhood and Reddit, leading to choppy trading in so-called “meme stocks” like GameStop and AMC.

On Monday, the US Securities and Exchange Commission said Robinhood and other online brokerages have been promoting investment to encourage activity from users.

Cryptocurrencies are not regulated in the UK, which means that people are not protected under consumer protection laws should their money be lost for any reason – for example in the hacking of an exchange.

Earlier this year, the Financial Conduct Authority (FCA) warned crypto investors to be prepared to lose all their money, echoing a similar warning from Bank of England Governor Andrew Bailey.

Last week, the Deputy Governor of the Bank of England, John Cunliffe, likened the growth of the cryptocurrency market to the rise in subprime mortgages that contributed to the 2008 global financial crisis.

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