An estimated 2.3m adults hold cryptocurrencies, up from 1.9m last year, according to the City of London’s financial regulator.
While ownership of cryptocurrencies has increased, understanding of them appears to have gone down, according to the findings from the Financial Conduct Authority, published earlier today.
Attitudes towards cryptocurrencies, or cryptoassets, appear to have changed, according to the research.
Some 38 per cent of users regard them as a gamble, down from nearly half (47 per cent) last year. And 78 per cent of adults have now heard of cryptocurrencies, up from 73 per cent in a year.
Recognition of Bitcoin far outranks any other cryptocurrency, the FCA said. On average, people invested around £300.
Lack of understanding
Overall understanding of cryptocurrencies is declining, suggesting that some people who have heard of cryptoassets may not fully understand them.
Only 71 per cent correctly identified the definition of cryptocurrency from a list of statements, the watchdog said.
Enthusiasm for cryptocurrencies appears to be growing, with more than half (53 per cent) of users saying they have had a positive experience so far and are likely to buy more.
One in 10 people who have heard of cryptocurrency said they are aware of consumer warnings on the FCA website. Of these, 43 per cent said they were discouraged from buying cryptoassets.
The profile of cryptocurrency owners generally has not changed substantially and remains skewed towards men over the age of 35, the regulator said. Most pay for cryptocurrencies using their disposable income.
More recent acquirers are a little more likely to be 25 to 44 years old and borrow money to buy cryptocurrency.
Cryptoassets are largely unregulated. The FCA said most consumers recognise that crypto investments are not protected, although 12 per cent of users believe otherwise.
The FCA’s latest research on crypto paints a broadly positive picture and shows most consumers are using crypto sensibly and moderately, commented Laith Khalaf, financial analyst at AJ Bell in London.
“However, there is a dark underbelly lurking in the figures, which suggests there is still potential for widespread consumer harm,” he added.
“The fact that 14 per cent of crypto buyers have borrowed to invest is simply terrifying. The extreme volatility and uncertain long-term outlook for crypto means holdings can be wiped out, leaving borrowers with nothing but their debt as a memento,” Khalaf continued.
Around one in five crypto buyers said they were driven by FOMO, which is never a good motivation for financial decisions, he stressed.
“A similar proportion said they were buying crypto instead of shares or other investments, which suggests some consumers are leapfrogging traditional assets which can help to build long term wealth.”
“Buying cryptocurrency is a dangerous financial activity and while many consumers appear to understand the risks, some are carelessly playing with fire,” Khalaf concluded.