Trending
Lack of crypto literacy is thing and a problem. Perhaps it stand to reason because, as an asset class, cryptocurrency is young. Bitcoin, the largest digital asset, was invented in 2008 and went into use the following year.
Maybe it’s also the result of cryptocurrency being rooted in technology that some investors find complex, but the reality is many market participants fess up to not being “crypto literate” and that could prove problematic as more investors become engaged with digital assets. Arguably, it’s problematic right now because bitcoin prices, even with a pullback in recent days, are flirting with $100,000 and memecoin mania has reached a fevered pitch.
While advisors aren’t in the business of crypto advocacy or degradation, it can be advantageous to get a sense of crypto-enthused clients’ knowledge bases. Chances are the number of clients interested in digital currency is rising, but that doesn’t imply their literacy is increasing in commiserate fashion. Data indicate that’s likely the case.
Crypto Literacy ‘Dangerously Low’
A recent Pip World survey of 12,045 responses found the self-described crypto literacy rate in the U.S. is just 25%, or about half how investors described their literacy of traditional assets, such as stocks and bonds. Pip World CEO Saad Naja described the crypto percentage as “dangerously low.”
“The findings of this report highlight an urgent and undeniable truth — financial literacy in the crypto space is dangerously low,” he said in the report.
He added that many crypto market participants don’t possess the “foundational knowledge needed to succeed” and that they enter and navigate the market blindly. Acknowledging those factors, it’s not surprising that 70% of crypto market participants confessed to losing money and an even higher percentage – 76% -- said they regret some of their crypto decisions.
It’s not all bad news. Regardless of “genre,” financial literacy can be improved and the more interested in a topic investors are, the more likely they are to seek out education. Second, the Pip World study indicates that that investors that have taken crypto losses feel the pain in an emotional sense. No one wants added stress in their lives and retail crypto traders that are feeling stressed will either bolster their knowledge bases or depart the market altogether.
So Who’s Crypto Literate?
As noted above, rising cryptocurrency curiosity among clients doesn’t mean their knowledge is improving, but the Pip World survey notes there is a somewhat linear relationship between crypto success and higher rates of literacy.
Translation: whales – crypto investors with large digital wallets – are highly literate in this asset class. Ninety-six percent of whales describes themselves as crypto literate, but they make up just 5% of market participants, according to Pip World. Interestingly, the most speculative crypto market participants are among the least literate.
“On the other hand, day traders — those representing 6% of crypto investors in the report — have the lowest financial literacy rate, estimated at 27%. Pump and dumpers, which are estimated to account for a significant 18% share of crypto investors, are associated with a financial literacy rate of 45%,” reports Helen Partz for CoinTelegraph.