2022 was a challenging year for global markets, with inflation, rising interest rates, and a weak global economy causing major financial assets to perform dismally.
Despite this, most retail investors, especially younger ones, are feeling optimistic and see it as an opportunity to learn and buy the dip with long-term gains in mind. But as we know, investor sentiment is rarely ever monolithic. Thankfully though, eToro's latest survey provides valuable insights into the crypto investor landscape, including which groups are still bullish about investing and which have lost confidence in the market.
The survey, which polled approximately 10,000 retail investors across 13 countries, including 1,000 from Australia, is part of eToro's latest Retail Investor Beat. In this continuation of our two-part series, we will take a closer look at the survey data and analyse the key findings related to the increasing adoption trend among different age groups and demographics.
Why are half of Australians avoiding crypto?
According to verified statistics provided to Stockhead by eToro, 37% of Australian crypto investors are mainly drawn to this asset class due to its high return potential, while 34% believe in the power of blockchain and its transformative capabilities.
However, for the majority (55%) of Australians who avoid crypto, perceived risk is the biggest factor holding them back (55%), with a lack of regulation being another common reason (33%). This is echoed in the latest 2022’s Australian Independent Reserve Cryptocurrency Index (IRCI) where 36.1% cited a lack of regulation and consumer protection as the main reason they didn’t invest in crypto, up from 24.8% the previous year. 32.5% of those surveyed said they would be more likely to invest if the industry was better regulated and there were greater consumer protections in place.
This has no doubt contributed to the prevailing scepticism among Australians regarding the widespread acceptance of cryptocurrencies by businesses and the general public. The same IRCI report has indicated a rise in the proportion of Australians who deem widespread adoption unlikely or very unlikely, from 29.2% in 2021 to 34.7%.
Fortunately, with robust regulation on the horizon for later this year or early 2024, we may see a shift in this sentiment.
Age demographics impact investing sentiment
The latest survey also sheds light on how the bear market of last year impacted the investing appetites of retail investors beyond just Australia. While a third of investors reported a reduction in their appetite for investing, with 8% of them completely turned off from investing, the majority (67%) remained either ambivalent or positive about 2022 and its influence on their investing mindset. In fact, some investors viewed the bear market as an opportunity to purchase the dip or enhance their investing approach.
Interestingly, this sentiment varies significantly depending on age demographics. Among 18-34 year olds, only a quarter (23%) indicated a decrease in their investing appetite in 2022, compared to 40% of those over 55. Conversely, two-thirds of 18-34 year olds reported that their investing appetite had actually been boosted thanks to the bear market, while only a third of those over 55 felt the same. This sentiment is likely influenced by retirement time horizons, with younger investors having more time to witness their portfolios recover and prosper.
How age impacts sentiment. Source: eToro
Ben Laidler, Global Markets Strategist at eToro, remarks on this: "The fact that two thirds of retail investors feel indifferent, or even more positive, after the worst year for markets in a generation might seem odd. But it’s important to remember that the majority of this cohort think in years and decades, despite the common misperception that they are motivated by short term gains. For those with these horizons, the back end of 2022 has offered a chance to buy companies at lower valuations, improving the outlook for long term returns."
Tech confidence and risk tolerance drive optimism
The elevated level of optimism among younger age groups found by eToro is consistent with another noteworthy piece of data, which sheds light on the underlying factors driving this bullish sentiment. Specifically, investors aged 18 to 34, who are typically more risk-tolerant, exhibit heightened confidence in the technology sector. Remarkably, 73% of this age group have invested in technology — in stark contrast to the comparatively low figure of 48% among investors aged 55 and above.
The topic of risk tolerance is certainly interesting as well and may potentially explain the divergence between those who are willing to invest in crypto and those who aren't. As mentioned earlier, eToro's study found 55% of those who are averse to cryptocurrency cite risk as a major deterrent. In contrast, the Australian Securities and Investments Commission (ASIC) reports that the majority of cryptocurrency owners do not view their investments in the same way. Only 20% of cryptocurrency owners consider their investment decisions as "risk-taking", while just 17% of those who solely owned cryptocurrency considered their products risky or speculative in any way.
Of course, several other factors also underscore the optimism among investors. One such factor is an awareness that market cycles are a natural occurrence, accounting for 34% of respondents. Another key driver of bullish sentiment is a lack of concern regarding short-term volatility, which 33% of survey participants cited. What's more, the study shows that a significant 24% of investors remain optimistic about market performance in 2023, indicating a willingness to seek out and seize investment opportunities despite the challenges posed by the current economic climate.
The path to widespread cryptocurrency adoption
While the eToro survey indicates that while many Australians, especially younger generations, are not deterred from investing in cryptocurrencies — the lack of regulation and perceived risks pose significant barriers to entry for the wider population.
It is evident that risk management and education are crucial in driving cryptocurrency adoption among Australians. Moreover, pro-consumer regulatory measures will play a crucial role in ensuring a stable and reliable market. The industry's ability to address these challenges effectively will determine the future success of cryptocurrencies in Australia, building greater trust and confidence among investors.
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