Only equities outrank crypto in retail portfolios, Australian research finds

Cryptoassets rank second only to equities in popularity with retail investors, according to new research from the Australian Securities and Investments Commission (ASIC).

The regulator issued a report detailing the results of retail investor research that found 44% of retail investors reported holding crypto — trailing only equities, at 73%.

Moreover, ASIC found that about 25% of investors said crypto was their only investment holding. And crypto trading platforms were among the most popular trading venues after bank-owned platforms.

The research was conducted in late 2021, before the meltdown in crypto markets and amid increased retail investor activity.

“Despite changes to economic conditions since the research was conducted, retail market activity has generally remained elevated this year compared to pre-pandemic levels,” ASIC noted.

The apparent popularity of crypto with retail investors raised alarms for the regulator, it said.

“We are concerned about the number of people surveyed who reported investing in unregulated, volatile cryptoasset products,” said ASIC chair, Joe Longo, in a release.

“According to the survey, only 20% of cryptocurrency owners considered their investment approach to be ‘risk-taking,’ raising concerns that investors did not understand the risks of this asset class,” he said.

“ASIC is also concerned that there are limited protections for cryptoasset investments given they have become increasingly mainstream and are heavily advertised and promoted. There is a strong case for regulation of cryptoassets to better protect investors,” he added.

In addition to the popularity of crypto, the report found that retail investors use a variety of digital channels and social media platforms to find investing information, with 41% citing social media, including YouTube, Facebook, podcasts and “finfluencers” as sources, and 34% relying on Google searches.

“It’s encouraging to see more people, particularly younger investors, engaging in the market,” Longo said. “A third of all surveyed investors said they are ‘in it for the long-term.’ However, half of those surveyed admitted they have invested in things because they didn’t want to miss out.”

“This, coupled with more complex and opaque financial product and service offerings, and the speed and reach of marketing and distribution through digital channels, may expose investors to new risks or higher levels of existing risks,” he said.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.