Investors turn backs on crypto as they look for safer options
Investors spooked by the cost-of-living crisis and wider global economic conditions are shunning cryptocurrency in favour of safer choices, according to new research.
Law firm Michelmores conducted a survey of 1,500 millennials, Gen X and baby boomers with over £25,000 to invest, which found that for two-thirds of them, risk is now the most important factor when choosing an investment.
Just over half (51 per cent) of respondents said that soaring living costs had decreased their appetite for risk to some degree when it came to investing. However, only 17 per cent describe their current financial position as ‘pessimistic’, while 40 per cent say they feel ‘comfortable’.
Michelmores’ research found that attitudes to cryptocurrency are changing, with many investors becoming disillusioned with it. It said investors are highly unlikely to buy into ‘riskier’ assets such as cryptocurrency in the coming year.
Despite the increased awareness of risk, over half (58 per cent) of those surveyed state that they are still fairly or very likely to invest in financial products or schemes within the next year, viewing property as a low-risk option which would offer ‘the best return’ on investment amid wider market instability.
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Each of the surveyed generations have a higher interest in traditional forms of investment, such as cash and property, than two years ago.
Almost a quarter of investors view cash (22 per cent) and property (24 per cent) as the best protected investments, while equity funds (16 per cent) and bonds (16 per cent) are less popular. There is a very low appetite for investment in cryptocurrency (nine per cent) and commodities (nine per cent).
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An increasing number (55 per cent) of millennials say that risk is important to them when investing money, compared with just 44 per cent in 2019. Awareness of risk is high for all generations, with over two-thirds (69 per cent) of all respondents noting this as the most important factor when making investment choices.
“The instability caused by Brexit, the pandemic and the war in Ukraine – on top of a global forecast recession – has led to millennials being more risk averse in their investments,” said Richard Cobb, senior partner at Michelmores.
“Cryptocurrency is a volatile asset class and – understandably in the wake of the FTX collapse – is currently suffering from a weakened level of confidence. With ongoing conversations around ‘Britcoin’ and calls for increased regulation, this could boost investor confidence and cement cryptocurrency as more than just a passing trend.
“While our data suggests that awareness of risk is heightened in each generation, those with a longer-term outlook may seize the opportunity to buy up a variety of assets while the value is low and potentially reap the rewards.”
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