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All Aboard The Crypto Train: Who Are The Latest Crypto Investors?

Wednesday, February 17, 2021 • 4:00 PM EST

Key Takeaways:

1. With recent news from companies like Tesla investing in Bitcoin or PayPal and Square accepting cryptocurrency through their apps, new users are coming into crypto: new investors now account for 41.5% of all deposits, up from 14.8% in November 2020.
2. Crypto is also growing in popularity with people who own it: the average investor now holds approximately 13% of their portfolio in cryptocurrency, up from an average of 3.8% in January 2020.
3. Deposits to crypto accounts are soaring: January 2021 is 23x higher than deposit volumes in January 2019 and average deposit per month grew from $432 in January 2019 to $1,212 in January 2021.
4. More than stocks, investors are putting money into crypto: crypto deposits grew 10x from January 2020 to January 2021 compared to 2.6x growth for retail investment deposits during the same period.
5. Cardify.ai's survey of hundreds of investors shows that Crypto users are buying for the long haul with long term portfolio growth being the most common driver for both inexperienced (42.7%) and experienced (40.7%) investors.

Since Satoshi Nakamoto developed Bitcoin, the cryptocurrency markets have been a source of great wealth for a small handful of people. For millions of others, cryptocurrency represents everything from a fun speculative investment to the future of money. Using first-person data from Cardify transactions, we analyzed financial patterns and demographic information about who is buying cryptocurrency. Further, we surveyed users to better understand their cryptocurrency investing experience, knowledge, and plans for the future. 

Deposits into cryptocurrency are skyrocketing in terms of the number of investors, the average deposit per person, and the average portfolio percentage dedicated to crypto. Deposit and withdrawal volume also shows a significant correlation between investment and the price of Bitcoin. However, despite more people investing, the vast majority of crypto investors admit they have very little knowledge of how crypto markets actually work.

The average user is also depositing significantly more into cryptocurrency than in the past. Average monthly deposits nearly tripled from $432 in January 2019 to $1,212 in January 2021. Withdrawals also increased ($700 in January 2019 to $1,041 in January 2021), but it seems more money is coming into the system than going out: withdrawals made up 43.1% of total cash transfers in January 2019 but dropped to 26.8% of transfers in January 2021.

As the price of bitcoin gained momentum toward the end of 2020 and in early 2021, investment platforms began to attract more attention. Cardify data shows that user growth in January 2021 is 11x higher compared to January 2019. The rise in new years has also changed the composition of crypto market deposits. In November 2020, only 14.8% of deposits came from new users. In February 2021 so far, new users account for 41.5% of deposits.

Investors across the board are also holding significantly more of their portfolios in cryptocurrency. The average investor now holds approximately 13% of their portfolio in cryptocurrency, up from an average of 3.8% in January 2020.

Today, it seems investors are now choosing cryptocurrency more than the traditional retail investing market. While retail investing deposits grew a respectable 2.6x from January 2020 to January 2021, cryptocurrency deposits grew by 10x in the same period.

Data also shows significant overlap between crypto and retail investors: 62.8% of all crypto investors from November 2020 onwards also deposited into retail investing platforms.

Who owns crypto now?

After analyzing verified transaction data from cryptocurrency owners, Cardify surveyed crypto investors to better understand who they are - and their opinions about the crypto markets. The traditional crypto investor still heavily skews young (76% are 34 or younger), male (69%) and mid to upper income (34% earn more than $75,000 annually 60% earn more than $50,000 annually). However, women are becoming a much more significant part of the pool, jumping from 21% of investors in early 2020 to 31% of investors in late 2020 and early 2021. While the gender composition of crypto investors changed over time, demographics around age and income levels stayed the same.

To better understand cryptocurrency investors and “HODLers,” Cardify surveyed users on their experience levels, knowledge of cryptocurrency, and investing motivations. Users are roughly split between saying they have experience (58.2% have been investing for more than one year) versus being relatively new to crypto (41.8% have been investing for less than one year).

Regardless of experience level, the majority of investors (83.1%) report moderate or low levels of cryptocurrency knowledge. Inexperienced investors admit this at a slightly higher rate (86.9%) than experienced investors (80.3%).

Motivations for investing

Unlike the recent uptick in retail investing and the motivation for a quick financial profit, cryptocurrency is viewed as a long-term investment. When asked about motivations for investing in cryptocurrency, long term portfolio growth remained the most common driver for both inexperienced (42.7%) and experienced (40.7%) investors. 

Other factors differ depending on experience level: 32.2% of inexperienced investors cited short-term financial gain compared to 22.1% of experienced investors. On the other hand, 20.8% of experienced investors cite portfolio diversification as important for them, whereas only 15.4% of inexperienced investors say the same.

Despite inexperienced investors citing long-term gains as their primary motivation, 41.9% intend to hold their crypto for fewer than 12 months. Only 19.9% of experienced investors say the same. On the flip side, 59.0% of experienced investors say they intend to hold crypto for more than 2 years, compared to only 30.7% of inexperienced investors.

Favorite coins and price speculation

Looking at how people buy, crypto exchanges are the primary buying avenue for both experienced (84.6%) and inexperienced (67.0%) investors. Bitcoin and Ethereum remain the most popular coins among all investors, though 28.1% of inexperienced investors report liking Dogecoin more and increasing their investment into DOGE because of Elon Musk’s recent support for the cryptocurrency. 

Given that Bitcoin is the primary coin people buy, there is a lot of speculation about its price - and if it will come crashing down after new highs. According to our survey, the majority of people remain bullish. A small minority (11.3%) of experienced investors worry Bitcoin will dip below $20,000 in 2021, while one fifth (20.6%) of inexperienced investors fear the same

Ready for mainstream?

Recent developments in the stock market include the ‘Gamestop saga’ seem to have driven people to consider alternative investments. Combined with major support from public figures like Elon Musk and Jack Dorsey, it seems cryptocurrency is becoming the alternative investment of choice. However, economic fundamentalists are concerned that cryptocurrency is a bubble like any other, citing volatility as the key reason why these coins will never replace fiat currency. It remains to be seen where the cryptocurrency markets will go from there, but there will always be those waiting for it to go - as the meme suggests - to the moon.