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A Crypto Explosion: Analyzing Altcoin and Bitcoin Investments in 2021

Friday, October 8, 2021 • 9:30 AM EST

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The crypto markets are exploding with novel coins and new investors are experiencing the wild volatility of cryptocurrency. To better understand the current crypto investing environment, Cardify analyzed its card-linked financial data to assess deposits, withdrawals, and crypto investor growth trends. Then Cardify surveyed 1,330+ cryptocurrency investors to learn more about their crypto investing experience, perspectives on altcoins, views on celebrity crypto endorsements, and opinions on the relative risk of cryptocurrency investing.

With the exception of the Reddit-fueled trading frenzy of early 2021, consumers have never been so invested in crypto as they have in the past year and a half. For those invested, crypto represents a second all-time high 24.7% share of total investment deposits.

On an indexed level, crypto deposits peaked at 16x the Jan 2020 baseline during the Reddit saga of early 2021 and crashed down to 6x, but are now back up around 9x. In comparison, retail investing deposits never climbed above 2x growth during the same period.

One potentially negative change for crypto is that fewer people seem to be getting in the game lately. After May 2021, new user growth dropped precipitously, hovering around 5x indexed growth compared to a peak of over 20x. This is still higher than retail investing, though, which saw a highest peak of around 4x growth.

Crypto deposits peaked at $300 average monthly deposit in Q1 and Q2 2021 before crashing back down to pre-Reddit frenzy levels. However, they are now nearly back up, hovering at $263 average monthly deposit. This sits in contrast to falling average retail investment deposits. After peaking above $400 average monthly deposit in early 2020 (and staying well above average crypto deposits at the time), retail investment deposits have fallen to below $250 per month, and now are hovering roughly in line with rising average crypto deposits.

As data has shown in the past, deposits and withdrawals correlate to the price of Bitcoin. The correlation seems to be losing strength though, with Bitcoin’s sustained high price in Q2 2021 causing a drop in deposits and withdrawals at first, then drawing investors back in right before the price crashed again.

Investor survey perspectives

Of the 1,300+ crypto investors who responded to Cardify’s survey, only 15% say they fully understand the value and potential of cryptocurrency. Just under half (49%) say they moderately understand, and 37% say they only learn about crypto through word of mouth.

A small minority fully understanding crypto could be due to the fact that 70% of investors have been at this for less than three months (15%), three to six months (24%) or six to 12 months (31%).

From a risk perspective, nearly half (43%) believe crypto is not as safe as traditional investments. 50% say it’s just as safe, and 7% say crypto is safer than traditional investments.

Investor Portfolio Breakdowns

On average, 40% of the average investor’s portfolio is in coins other than Bitcoin (BTC) or Ether (ETH).  From both an awareness and investment perspective, Dogecoin (DOGE) is the most popular. 83% of respondents were aware of DOGE - more than double the coin with the second-most awareness - and 51% invested in DOGE. Other coins with substantial awareness include Binance Coin (35%), XRP (29%), and Cardano (28%).

In contrast, 71% of crypto investors owned or invested in BTC and 52% own ETH.

Since the start of 2021, many more altcoins have come onto the market as minting cryptocurrencies has become easier. For instance, Polydoge and Shiba Inu coins were created as DOGE lookalikes to (hopefully) ride the coattails of DOGE’s unlikely price surge. 

When asked about these new altcoins, 61% of crypto investors said they were aware of them and 37% have considered investing, but only 26% actually invested in them.

Crypto information sources

Social media continues to play a massive role in the cryptocurrency space, and now influencers have gotten on the trend. 61% of survey respondents said they have seen social media influencers promoting cryptocurrencies. Of those promotions, 49% was a top market cap coin (such as Bitcoin), 47% were promoting new minted altcoins (like Polydoge), and 4% were promoting other offerings in the cryptocurrency realm.

Financial Blogs seemed to be the most popular area for Cryptocurrency information, with 81% saying they receive information from blogs rarely (23%), about half the time (35%), most of the time (19%) and every time (4%). Perhaps due to cryptocurrencies infancy, social media feeds and family and friends followed as the 2nd and 3rd most popular options. With 79% of individuals seeking information from twitter topics such as #ETH, and 78% seeking information from friends and family.

The least common sources of information amongst respondents was from Financial Advisors, with 49% saying they never consult for advice in regards to crypto. Mainstream Celebrities/Executives came in as the second least common, with 37% saying they never consider the information provided. This would be from celebrities and executives such as Elon Musk.

Chart amended on October 17th, 2021 due to rounding error

A fractured, growing space

Cryptocurrency has been around for years, but exploded more in 2021 than any year prior. Bitcoin reached new heights and crashed multiple times throughout the year and an avalanche of new altcoins flooded the market. 

What remains to be seen is whether the volatility and social media-fueled nature of cryptocurrency at the moment is circumstantial or inherent. Either way, it could lead to a future for cryptocurrency in the modern financial economy, but even as some countries accept Bitcoin as legal tender, no one is quite sure what kind of future cryptocurrency will hold.