Crypto investors claim to have better financial knowledge than they actually have, Portuguese survey shows

The profile of investors in crypto-assets appears to be different than that of other investors, according to preliminary findings from a survey conducted by the Portuguese Securities Market Commission (CMVM) between June 18 and August 6, 2018.

Thus, investors in crypto-assets (ICOs / Bitcoins) believe they have a better financial knowledge than they actually have. Typically, investors in ICOs / Bitcoins are younger, hold more shares and are more risk-taking. In particular, 47% of crypto investors are between 25 and 39 years old, and 62% admit to be risk-taking.

In terms of psychology, there is a somewhat worrying finding. More than half (63%) of investors in ICO / Bitcoins believe that they know enough about investments so that they do not need to consult a financial industry professional. This compares to 43% of the total sample of surveyed investors who believe so.

With regard to psychological biases, crypto investors often hold loss-making assets for too long in their portfolio. By contrast, the average investors are often prone to dispose of profit-making assets too swiftly.

Across the entire sample of surveyed investors, 36% say they are risk averse, 28% are neutral and 38% say they are risk taking.

When choosing a type of investment, 98% of the respondents consider whether they truly understand the characteristics of the product. The risk of loss of invested capital was a key factor for 95% of the respondents, and the clear knowledge of commissions and fees associated with the investment was mentioned as a factor by 89% of the respondents.

Let’s recall that, on November 3, 2017, CMVM issued a press release warning investors about the underlying risks of investment in ICOs. It drew attention to new financing models for business projects of a digital nature, most of which are not covered by the regulatory framework. This legal gap implies the non-existence of protection for investors, who face other risks, such as that of the loss of capital invested, high price volatility, the possible lack of liquidity, the lack of appropriate documentation for a complete understanding of the investment to be made, and, furthermore, the potential for fraud and/or money laundering involved in these offers. Concern over the risks of ICOs is equally prevalent among other European supervisors.