Daily Brief - Most bitcoin investors barely broke even (Dec 7, 2021)

Their entry point wasn’t great and they probably lost money. According to the latest Grayscale Investments survey, 55% of bitcoin investors first bought the currency in the last 12 months (Ok, ok so some of them would have already owned it in 2020. We oversimplified: guilty.)

That puts the average price around … 49,000. Just about where we are now.

This seems consistent with the anecdotal evidence of wider acceptance. It also speaks to the age old phenomenon that has accompanied any asset rise: the fear of missing out (FOMO). Eventually, its irresistible draw pulls everyone in.

In a fascinating insight into bitcoin’s investor base, the survey revealed that over half of bitcoin investors are likely to have barely broken even on their investments. And the number of believers has risen. In 2019, barely 36% of the respondents were keen to make bitcoin-related investments. Now, 59% are.

Even baby boomers are jumping on board. Among the 55-64 yo crowd, the interest in Bitcoin investment products rose from 30% just last year to 46% this year. Is it true acceptance, inflation fears, or just - FOMO?

Many also seem to be quite crypto-curious. Unlike the early aficionados, the latest batch of investors appear to be more driven by opportunity than fanatical adherence to a particular expression of the blockchain technology. 87% of Bitcoin owners’ wallets contain one or more of the other digital currencies.

Fine, so what do we take away from this?

The most obvious one is that the number of “paper hands” in the bitcoin market has risen substantially, and that signals more volatility ahead.

Early bitcoin investors had a comfortable buffer after the pandemic run up in bitcoin value. It’s far easier to have diamond hands when you’re investing “house money”, so to speak. The latest batch, however, got in late and near these levels. They may also be traders rather than die-hard believers.

That could make them far faster on the trigger on subsequent selloffs, magnifying any downside moves.