Two-Thirds of Crypto Investors are HODLers
Published on 20/09/2021
- Two-thirds of cryptocurrency investors follow a 'buy-and-HODL' strategy, with inflation increasingly cited as a concern.
- One-in-seven crypto investors are in it 'just for fun'.
- Just one-in-eight crypto investors actively seek to trade the market's ups and downs.
According to a recent survey by CryptoBuyer.com, a crypto comparison service, 68% of investors bought crypto in 2021 with a view to build long-term wealth. In contrast, 14% of investors bought crypto just for fun, and only 12% actively sought to trade the market’s ups and downs. The proportion of investors who bought crypto with a view to spend, or send it, was negligible.
These findings, borne out of a survey of 1,256 CryptoBuyer.com investors polled in the first two weeks of September, temper commonly held views that crypto-currency investors are short-term speculators.
"Whilst Dogecoin, GameStop and meme stocks generated buzz in 2021, most crypto-currency investors follow a long term 'buy-and-HODL' strategy" said Stéphane Bottine, founder of CryptoBuyer.com. This simple strategy entails buying and holding coins over many years, without attempting to trade the market’s ups and downs. Large crypto-currency investors, known as "whales", have perfected this strategy, accumulating coins when Bitcoin sells off.
This strategy has delivered exceptional returns. On average, Bitcoin has seen its value rise fivefold every year since its inception, with a 449% compound annual growth rate. As Bitcoin's supply is limited, its price has risen sharply over time as more people enter the market, driving up demand. These findings underscore crypto's appeal as a long-term store of value, in spite of its short-term volatility.
In the last 12 months, crypto adoption has risen 881% according to Chainalysis (1). Demand was exceptionally strong across emerging markets, where investors often turned to peer-to-peer marketplaces like Paxful[site] or LocalBitcoins[site], as a hedge against soaring inflation, currency collapse and exchange rate controls (2). In Turkey, crypto trading volumes have risen fivefold from 2020, even as inflation is approaching 17% and the Lira has fallen 14% against the US Dollar year-to-date (3).
Across developed markets, institutional investors made their first large scale forays into crypto-currency in 2021, turning to centralised exchanges like Binance[site]. Transaction sizes in excess of $1 million now account for 60% of Bitcoin daily trading volumes, up from 25% in January 2020, according to Glassnode (4). The tide of institutional money shows no sign of abating, with Germany recently allowing funds aimed at institutional investors to allocate up to a fifth of their assets in cryptocurrencies (5), and Coinbase partnering with retirement plan providers in the US.
Stéphane Bottine adds that "the outlook for crypto currency has never been brighter, with inflation expected to remain stubbornly high, and central banks expected to maintain low and even negative interest rates for many years into the future", regardless of today's sell-off.
1. The 2021 Global Crypto Adoption Index: Worldwide Adoption Jumps Over 880% With P2P Platforms Driving Cryptocurrency Usage in Emerging Markets, Chainalysis.com, https://blog.chainalysis.com/reports/2021-global-crypto-adoption-index
2. Cryptocurrencies: developing countries provide fertile ground, Financial Times, https://www.ft.com/content/1ea829ed-5dde-4f6e-be11-99392bdc0788
3. Turkey's slumping lira adds fuels to crypto trading boom, Reuters.com, https://www.reuters.com/article/crypto-currency-turkey-int-idUSKBN2BN1FO
4. The Week On-chain (Week 36, 2021), Glassnode.io, https://insights.glassnode.com/the-week-on-chain-week-36-2021/
5. Germany grants institutional funds the ability to invest in crypto, FT.com, https://www.ft.com/content/c523fa52-25da-4d7e-8378-cc58bd1e6c89