Most retail investors are still very interested in investing in digital assets despite what is arguably the worst bear market in crypto history.
According to a recent survey report by social trading platform eToro, more than two-thirds, or about 69%, of retail investors said they were positive or had mixed feelings about the impact of the prolonged market downturn experienced over the past year. The remaining third, around 31%, said they were hesitant to invest in the industry after the crash.
Commenting on this renewed interest from retail investors, eToro global markets strategist Ben Laidler said:
“The fact that two-thirds of retail investors are feeling indifferent or even more positive after the worst year for the markets in a generation may seem strange. But the majority of this cohort thinks in years and decades. For those with longer time horizons, the end of 2022 offered a chance to buy companies at lower valuations, improving the outlook for long-term returns.
Investor Confidence Returns as Inflation Threat Eases
The report, which surveyed 10,000 retail investors from 13 countries and three continents, found that the primary driver of renewed investor confidence in crypto investing is diminished fear of the perceived threat of inflation among investors.
The study found that at the end of the third quarter of 2022, around 24% of retail investors viewed the perceived threat of inflation as the biggest risk to their investment portfolios.
However, by the end of 2022, inflation concern had fallen to 19%, while around 22% of respondents cite the global recession as the main threat to their investment portfolios looking ahead to 2023.
As a result, many investors are adjusting their portfolios, with cash allocation climbing to 50% and adding more defensive assets like healthcare and utilities.
Young retail investors are more risk tolerant
The survey also revealed that younger investors are the least fearful of the crypto market, while older investors contemplating imminent retirement are more reluctant.
About 76% of young retail investors aged 18-34 feel positive or indifferent to the downtrend, while only 60% of older investors over 55 feel the same about the crypto market.
“2022 will have been the first major bear market for many less experienced retail investors, but data shows that it is older investors with shorter retirement horizons who are feeling the pressure the most,” the report added.