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Who is Buying Cryptocurrency and are they Making Money?

Picture what you believe is the typical cryptocurrency investor. Did you picture a young, tech-savvy millionaire? Chances are you did, and this seems to be the image most people have of cryptocurrency investors.

Ever since cryptocurrency’s popularity skyrocketed in 2017 with Bitcoin’s price exploding to nearly $20,000 per coin, investors have seen millions made and millions lost as new investors received a crash course on volatility. 

However, it’s not just novice investors with piles of cash who are taking advantage of investing in cryptocurrency. eToro, a social trading platform for international retail investors has compiled data from March 2017-2018 on the demographics of those investing on cryptocurrencies.

While it remains true that the bulk of cryptocurrency investors fall within the 18-35 age range, those investing are not always Silicon Valley savants who made their money in technology. One of the biggest sectors of investors actually comes from college-age students. According to eToro, the three biggest sectors of investors, split by occupation, are students, computer/IT services, and sales/marketing. The investors in the 18-35 age range are also investing heavily in the most popular coins, Bitcoin, Ripple, and Ethereum. This goes against the conventional investing strategy to take more risk while you’re young and can weather the volatility, as the most popular coins have traditionally proven to be the safest investments. However, there isn’t a long enough time horizon to accurately judge which coins are the safest investments. Following this risk tolerance pattern that seems to be opposite of traditional investors, eToro found that those investing in cryptocurrencies who are 55+ years of age are actually investing more heavily in altcoins such as Bitcoin Cash, Neo, and Stellar, which tend to be more volatile.

With the bulk of investors coming in at the 18-35 range and self-identifying as novice investors, it begs the question, are these young, inexperienced investors actually making money? As it turns out, according to eToro, the young investors are making money. The highest returns, in order, are being realized by those invested in Ripple, Ethereum, Litecoin, and Bitcoin. All popular coins that the novice investors put their money into. On the contrary, the investors in the 55+ age group are losing money. The three worst performing investment, in order, are Bitcoin Cash, Stellar, and Neo.

What are some legal implications of owning cryptocurrency with regard to estate planning?  Cryptocurrency comes with two keys:  one is public, and allows anyone to see your balance, and one is private, which allows the owner to access the funds.  If this private key is not known, the asset cannot be accessed or transferred to heirs. It will be lost forever.  Make sure it is documented in a client’s estate plan if that client has cryptocurrency, and where the private key is located.  Also, if the cryptocurrency is not listed in the will, a greedy family member can abscond with the asset without having it properly probated and given to the rightful owner, as this currency is unregulated. 

As more and more investors in cryptocurrency emerge, it is getting far more likely that when a client passes away, he or she owned cryptocurrency.  The lawyer handling the probate or trust administration needs to know what cryptocurrency is and how to transfer it to another.  What if you have a client who needs to transfer cryptocurrency into a trust?  Every estate planning attorney or elder law attorney should have a basic understanding of what cryptocurrency is and how to deal with it. 

One more noteworthy statistic, only 8.5% of cryptocurrency investors on eToro are female. Some women are trying to change that.  Crypto Moms, a website focused on female cryptocurrency investors, has a membership of 50,000, and has seen membership grow by 25% recently.  Perianne Boring, the founder and president of the Chamber of Digital Commerce, stated “We’re building the next level of the internet.  A new operating system for government and society.  And it takes all hands on deck to make this work.”  With these efforts, we will likely see the number of women cryptocurrency investors rise in the near future. 

As an attorney, you are always trying to make new connections and engage with potential clients. An important facet of this is knowing who your prospective clients are and what they are interested in. This data provides important insights into who exactly is investing in cryptocurrency and which coins they prefer. We will continue to provide updated statistics as new data comes to light and as more and more people become involved in cryptocurrency investing.

Watch this free course and learn more about planning with cryptocurrencies!

Your clients will come to you with questions. Make sure you know the basic concepts of the process of owning, managing, and trading cryptocurrencies.  

Topics include:

  • Introduction of Cryptocurrencies
  • How they are acquired, stored and traded
  • Common exchanges
  • Future: Big Investors and Smart Contracts
  • Taxation

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