by Faraaz Marghoob, Group Strategy Director, BBH Singapore
With the looming possibility of a $2.7 billion ‘Black Swan’ and potential ‘Crypto Winter’ on the horizon following the crash of Bitcoin, Ethereum and other major cryptocurrencies this summer, traders are keen to understand the state of the market to secure their portfolios and evaluate any future investment in the coming months.
Following the crash earlier in the year, we surveyed 1,200 Crypto investors in Singapore aged 18 and above to uncover the true state of the crypto market. While our findings were undertaken in the Singapore market, much of what we discovered speaks to the wider crypto landscape, and provides useful context for its future for DeFi investors the world over.
Most prominent from the research was the extent to which cryptocurrencies have become one of the top investment assets: 34% of Singaporeans have invested, second in popularity only to stocks, which still lead in investment assets at 39%.
Cryptocurrencies have particularly surged as investors sought to diversify their portfolios during lockdown, and buoyed by their innovative tech status: 54% of respondents believe that Crypto is the future of money. However, following the Coinbase chief executive’s recent comment that ‘anything could happen’, these findings may reassure traders worldwide who are considering re-evaluating their current stake in cryptocurrencies.
Equally educational were the age demographics most heavily invested in cryptocurrencies: a quarter of investors aged 45 and over had directed over 50% of their entire portfolio into cryptocurrencies, potentially seeking to bolster retirement pots, whilst 62% of Singaporean crypto investors are under 35.
Despite heavy overall investment across age demographics and the vast popularity of cryptocurrencies, what proved lacking was true understanding of the asset class and DeFi. Some 42% of respondents claimed only a basic knowledge of crypto, whilst half admitted little to no understanding of blockchain when they invested.
The volatility we have seen across both major and minor cryptocurrencies, which if reports are to be believed will continue to fluctuate over the coming months, may indeed spell crypto chills among many traders, particularly those with little understanding of the technology itself.
However, even in the face of rising financial risk, 65% of those surveyed will continue to invest in cryptocurrencies in the coming months. This decision to buy the dip (‘BTD’) leads us to wider questions about the asset and its supporters irrespective of the current financial climate, namely its ‘cultish’ status.
Close-knit, social communities of investors and sub-factions within these communities, in addition to the exclusive language used and proliferation of visual media such as memes, encourage many investors keen to be part of the ‘club’. Without experience or knowledge of cryptocurrencies many individuals are often tempted to increase those investments in a bid to grow or maintain their social presence within these groups.
Amid the turbulence of the current crypto markets, it may be these groups who suffer the impacts of another crash most severely, given strong encouragement within these communities not to divest of the asset, but to stay the course and ride things out.
Owing to the economic consequences of the crash earlier this year, many traders will be looking to consolidate their portfolios given continued uncertainty about the crypto climate.
Consequences of rumoured September ‘black swan’ events and Ethereum’s ‘merge’ transition could prove difficult for traders. Still, there is considerable positivity among investors.
It was found that some 56% of Singaporeans believe that the value of cryptocurrencies will only increase over time. This swift and widespread prominence and popularity of cryptocurrencies as an investment asset even among demographics who have never invested before makes the market both exciting and hard to predict.
In the UK and the EU, as the divide over regulation continues, the coming months will be especially telling for investors. But in Singapore, a region where more than a third of all inhabitants have interests in crypto, this belief in asset stabilisation and further success in the mid to long term, should provide a level of certainty that investors are unlikely to swiftly decide to cut and run.