With bitcoin continuing to make headlines as it breaks through price barriers, more new investors are drawn to cryptocurrency every day. But crypto newbies aren't doing much research before jumping in feet-first, a recent report from Cardify finds.
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Using survey data collected from 750 investors between Feb. 5 and Feb. 12 — a stretch during which the price of one bitcoin climbed from $37,000 to $47,000 — Cardify finds that only 16.9% of investors who have bought crypto "fully understand" the value and potential of cryptocurrency, while 33.5% of buyers have either zero knowledge about the space or would call their level of understanding "emerging."
A lack of knowledge or understanding hasn't stopped people from buying virtual currencies, though. More than 40% of all crypto purchases come from new investors, the survey finds. That's fueled in part by growing mainstream acceptance of crypto. In the past few months, both PayPal and Square added it to their platforms.
The survey results also suggest that many new investors have been spurred into action by a fear of missing out on gains. More than a third of survey respondents researched digital currencies for less than a month before buying, and 1 in 4 cryptocurrency holders told Cardify they were entering the space in the hopes of earning short-term financial gains.
Investment volumes in January 2021 were 23 times higher than they were in 2019, according to Cardify, with the average purchase size growing to $1,212, compared to just $432 at the same point in 2020. Withdrawals — or selling crypto assets — made up 26.8% of transactions, a drop from the 43.1% they represented in 2019 when one bitcoin was worth just over $3,000.
But it wasn't just bitcoin's meteoric rise that drew new investors to crypto — high-profile endorsements also played a role. Of the 750 investors surveyed, just under 180 say that they have a more favorable view of Dogecoin and are more likely to put their money into it thanks to Tesla CEO Elon Musk's many tweets about it to his 48 million followers.
Indeed, Musk's enthusiasm for the meme-based currency helped make it it the third-most popular crypto among survey respondents, with 8% saying they hold it. Bitcoin and ethereum, with their combined market caps well over $1 trillion, are still the most popular by far.
Investors aren't completely confident in crypto, however. More than half of the investors surveyed agree that their biggest concern is losing their money due to financial volatility.