Conversations and debates about how cryptocurrency works and whether or not to invest have been commonplace at dinner parties, in the office and online for some time now, says Tessa Nowosenetz, account manager at market research and data specialist firm KLA.
Those that invested were considered risk-takers, while those who had not were too nervous about investing and worried that the ‘bubble may burst’.
Cryptocurrency has become more mainstream, with El Salvador recently becoming the first country to recognise it as a legal tender – albeit not without hiccups and glitches in its first days of trade. Meanwhile, the pandemic has seen renewed interest with associated growth due to promotion by influential public figures such as Elon Musk, said Nowosenetz.
“With this marked crypto boom, we decided to take a closer look at the behaviour and attitudes of South Africans towards cryptocurrency via our YouView Panel of consumers.”
Trial is high, while serious investor numbers are low
Global cryptocurrency exchange Luno estimates that 15% of South Africans have cryptocurrency. This marks the second-highest percentage globally, said Nowosenetz.
“According to our data and a recent survey completed on the topic – among our panel of South African adults – numbers are higher, with 25% saying that they have cryptocurrency worth between R100 and R1,000.
“While this percentage is high, the amount invested is low. This indicates that the bulk of South African crypto investors are experimenting and dabbling without making a significant financial commitment.
Percentages for more serious investors:
- 13% have crypto of R1,001 – R10,000 in value
- 6% have crypto of R10,0001 – R50,000 in value
- 3% have crypto of more than R50,000 in value
Furthermore, 36% are keen to invest in crypto in the future, said KLA. The market research firm said that these numbers, along with the 25% dabbling with low-value crypto investments, indicate that many are ‘crypto-curious’ and interested in learning the ropes while engaging in trial.
Where does ‘crypto curiosity’ stem from?
According to Nowosenetz, curiosity stems from the perception that crypto offers a quick gain for those investing – without needing deep knowledge or much understanding of the category.
“The main appeal and advantage of crypto is the perception that there is an opportunity to make considerable gains on your investment in the short-term, with 43% stating this as their main reason for interest in crypto.”
Other reasons for being interested in crypto:
- It allows you to diversify your investments/portfolio (20%)
- It’s easy and accessible – everyone can do it; you just need a smartphone, a bank account, and some money (16%)
- It’s an exciting currency to invest in (8%)
- You can send it to people in other countries (4%)
- It’s not regulated (4%)
- You are cool trendy, and able to talk about having it with your friends and family (3%)
“However, despite being willing to invest and having an interest in making considerable gains in the short-term, many actually don’t seem to understand the details, workings and value of crypto, with 44% citing that their main concern around the digital currency is that they do not understand some element of it or how it works,” said Nowosenetz.
“So, we see a certain ‘investor’ mindset arise in this space: a consumer willing to take a risk to make a quick buck, despite lacking in knowledge or understanding how it works.”
What is holding people back?
Despite many being ‘crypto-curious’, 17% state that they don’t have any cryptocurrency and are not planning on acquiring any, said KLA.
When we asked what’s stopping people from investing in crypto or investing more in crypto, just over a third felt that they prefer to invest (or invest more) in formal/regulated financial products or with formal/regulated financial service providers.
Just under a quarter felt that they don’t know or understand enough to invest or invest more in crypto, so we see that lack of knowledge makes these people pull back from the category or from investing much more than their R100 – R1,000.
Other reasons that prevent people from investing or investing more:
- It’s too risky – the bubble could burst at any time, and you may lose too much money (11%)
- Don’t trust cryptocurrency (10%)
Governor of the South African Reserve Bank, Lesetja Kganyago, recently explained his stance on cryptocurrency in an interview with Moneyweb.
“It is a crypto asset. A currency must meet the following three criteria. One, it must be a generally acceptable medium of exchange. Secondly, it must be accepted as a store of value. And thirdly, it must be a unit of account. A cryptocurrency is a store of value. It is a medium of exchange, but is not generally accepted. It’s only accepted by those who are participating in it,” he said.
“Our approach is that we are going to have to regulate this because people go and invest in cryptos, and when they lose money, they ask what government has done about it.”
He said that many of these crypto-assets have got a technology called blockchain that underlies them. “It can be useful in many other respects. And so, like many other central banks, we are experimenting with blockchain technology,” he said.