Thursday 17 June 2021 11:55 am

Investors are balancing crypto volatility with lower-risk bets, study shows

Investors are offsetting crypto risk by diversifying their portfolios with lower-risk bets, according to new research.

The digital currency has seen a period of intense popularity recently due to increased savings during the pandemic, as well as through endorsements from big corporations and influential public figures.

Money management fintech Plum today published new data on how its customers are reacting to the cryptocurrency hype.

‘Balance out the risks’

The highly volatile asset has surged in popularity, with crypto spending up 172 per cent since October for Plum customers.

Investors are proceeding to adjust their risk in the stock market with a more diverse portfolio, to mitigate against the volatility they are seeing with their crypto investments.

“Investment industry stalwarts like Warren Buffett have been vocal about the risks of investing everything in volatile cryptocurrencies,” said Thanos Bismpigiannis, head of product at Plum.

“But we’ve seen that, in general, investors are using other investment assets to balance out the risks associated with crypto.”

Nine in 10 IFAs ‘would never recommend’ crypto

Plum noted that the age of its crypto customers was younger than its regular investors, with an average age of 31 compared to 33.

“There are signs that crypto will become more of a legitimate asset class, and could in the future be an important option for investors who have the capacity and flexibility in their portfolio to manage the risk,” Bismpigiannis said.

Plum’s research follows an Opinium poll that showed more than nine in ten UK independent financial advisers would never recommend crypto stocks to their clients.

Bitcoin, the biggest digital coin, has slumped around 40 per cent since hitting an all-time high of nearly $65k in April but is still up 40 per cent this year.

Smaller cryptocurrencies have been similarly volatile, sparking warnings from central banks that investors could lose their money.