05.09.2023
Like most investors, you’ve probably heard stories of incredible profits and painful losses from trading Bitcoin, Ethereum and other cryptocurrencies. Despite their high risk and complexity, cryptocurrencies have long ceased to be niche investments for experts and are now enjoying mass appeal. But what makes cryptos so fascinating? We asked around.
Our street survey shows that while lots of people have heard of cryptocurrencies, most don’t understand enough about what really lies behind them or the true potential of the underlying technology. While people in Switzerland are generally still tentative about investing in cryptos, current studies indicate the trend is more than a short-term phenomenon.
As a study by e.foresight and the market research institute Intervista AG shows, the proportion of the Swiss population who invest in cryptocurrencies rose sharply from 2021 to the time of the survey in January 2023. While just three percent of Swiss residents invested in cryptocurrencies two years ago, that figure now stands at 16 percent.
However, most people in Switzerland are still hesitant when it comes to cryptocurrencies. The main reasons for this are insufficient knowledge, as 56 percent of those surveyed indicated, closely followed by the volatility risk, which deters 55 percent from making a purchase.
There’s also a generational difference: it’s clear that younger people and men have tended to invest in cryptocurrencies so far. Most people who’ve already invested in crypto are in the 30–44-year-old age group, followed by 15–29-year-olds.
This trend is also clearly reflected amongst non-investors: younger people aged between 15 and 29 years old (29 percent) and 30 and 44 years old (23 percent) express the greatest interest in a potential purchase. In contrast, just 13 percent of 45- to 59-year-olds and six percent of 60- to 79-year-olds indicated a potential interest in cryptocurrencies.
The bankruptcy of some crypto exchanges abroad has also had an adverse impact on trust amongst Swiss investors. As a result, more transactions are expected to be executed via local providers in future. The study indicates that people who don’t yet have any cryptos but aren’t averse to buying them have a greater need for information. They would like their bank, as a professional contact partner, to provide general information and forecasts, advice and interactive training on the topic.
In the study carried out in January 2023, 16 percent of the Swiss people surveyed said that they’d already invested in cryptocurrencies. Most did so directly via a crypto exchange (44 percent) or an online bank (37 percent). But according to the findings of the Singapore financial institution Triple-A, just two percent of the Swiss population hold cryptos in 2023. That puts Switzerland in ninth place in Europe amongst the countries where the most cryptocurrencies are held.
This discrepancy is surprising at first glance. But it’s important to remember that not everyone who’s ever invested in cryptocurrencies is still holding them today. The study by e.foresight and the market research institute Intervista AG is an online survey, which could mean that participants tend to be more savvy about digital solutions – and digital assets – than the average Swiss person.
The “European Crypto Survey” by Strategy& carried out in 2022 concluded that almost half of those surveyed had not changed their investment behaviour, despite the collapse of the crypto market at the end of 2021. According to the study, this indicates that investors believe in the long-term success of this asset class. The survey also showed that people in Switzerland most frequently invest in the two major cryptocurrencies, Bitcoin and Ethereum. Alongside these, non-fungible tokens (NFTs) are becoming increasingly appealing to Swiss investors. The study indicates that over half of the crypto investors in Switzerland have invested between 1,000 and 10,000 francs in this asset class. 17 percent have already invested between 10,000 and 100,000 francs, while one percent of those surveyed have invested over 100,000 francs.
The study by e.foresight suggests that a lack of knowledge and volatility are still the main factors deterring potential investors from buying cryptocurrencies. There’s also a gender gap: men are concerned about the risk, while women more frequently indicate that a lack of knowledge prevents them from investing.
However, the “European Crypto Survey” from 2022 reveals that 21 percent of Swiss participants still don’t have access to cryptocurrencies via their main bank. Banks have recognized this trend and are increasingly incorporating services for crypto trading and custody into their portfolios. They are subject to strict regulatory provisions and must meet security standards. Compared to peer-to-peer trading, crypto brokers and crypto exchanges, cryptocurrency custody with banks tends to be more secure and better protected against loss or theft. Another reason for the reticence over crypto investments is fluctuations in their value and the high risk involved. The complexity of cryptos can also be off-putting. Relatively few people understand how cryptocurrencies work. People seem to be aware that basic knowledge of how crypto and blockchain technology works is absolutely vital before entering the market.
The fascination with cryptocurrencies is largely due to the technology they’re based on. For the first time, assets can be transferred peer-to-peer – in other words, directly from one party to another. This means that no intermediary is needed and that the technology has the potential to fundamentally change entire sectors and applications. So investing in crypto isn’t just a purchase of Bitcoin, etc., but can also be seen as an investment in a megatrend and its technological foundations. But how does this technology work?
Cryptocurrencies are assets based on cryptographic principles and decentralized networks. The decentralized structure means that peer-to-peer transactions can be executed without a central authority or institution (such as a bank) acting as an intermediary. The distributed ledger technology (DLT) plays a key role in this. In simple terms, the DLT is a decentralized and digitally managed account book that records the transactions. A network of computers with numerous copies of the ledger database ensures that the transactions are trustworthy and forgery-proof. Another key point about blockchain technology, which cryptocurrencies are based on, is that it saves the sequence in which it was modified. This prevents data, such as transactions, from being altered or manipulated at a later point. And it isn’t just the financial sector where this cutting-edge technology provides benefits. A wide range of blockchain solutions are now being deployed, such as in the healthcare sector, public authorities, insurance companies and much more.
When it comes to the cryptocurrency Bitcoin in particular, myths and stories have emerged about tech fans who have made millions in no time at all. But you also hear tales about lost wallets on discarded hard drives and total wipe-outs. According to the psychologist and emotion researcher Oliver Spitzer of September Strategie & Forschung GmbH in Cologne, all of these emotionally charged images are what makes Bitcoin so appealing.
The field of psychology in general has been focusing more heavily on cryptocurrencies and their use for several years now. This is partly because of the impact they have on a section of the population. But experts are also conducting research into what type of people use these new currencies and the risks involved. Oliver Spitzer points to two types: while one type are confident that Bitcoin, etc. will one day replace traditional currencies, others believe primarily in the rise in value of cryptocurrencies.
The fact that cryptos entail risks is well known and the subject of various studies. Anyone investing in cryptocurrencies should do some thorough research beforehand. A key point for well-informed investors is that cryptocurrencies are generally subject to greater price fluctuations. There’s no question that sharp price fluctuations have the potential to generate high returns within a short period. The prices of cryptocurrencies such as Bitcoin have risen sharply in the past, creating significant profit for investors. But it’s important to highlight that cryptocurrencies’ volatility also entails major risks. The extreme price fluctuations can result in hefty losses, especially for inexperienced investors. There are a few central points to bear in mind to guard against that.
If you’re considering investing in cryptocurrencies but want to take a gradual and considered approach, we’ve got the following tips for you:
