Babel Finance, a Hong Kong-based cryptocurrency financial services provider, recently released an in-depth report on who Chinese crypto investors are and what they think about the future of cryptocurrencies. The report is based on a recent survey conducted with partners Chain News, Chain DD and Odaily.
China is a leader in cryptocurrency mining because it manufactures relevant equipment and hosts some of the world’s largest crypto mining operations. According to Babel Finance’s report, Chinese investors make about half of global cryptocurrency transactions by value. In order to have a better understanding of Chinese cryptocurrency investors, Babel developed the survey to glean both qualitative and quantitative data. The company collected a few hundred responses during the survey period and also conducted several interviews.
The report can be divided under the following major themes.
A portrait of Chinese cryptocurrency investors
The report found that 76.3% of Chinese cryptocurrency investors are male. This is not surprising, as it is consistent with information from other countries and regions; Data shows that 78% of European cryptocurrency investors are male, while 71% of American Bitcoin investors are male.
In China, young people make up the majority of cryptocurrency investors. 51.8% of the investors are between the ages of 26 and 35, while 19-25 year olds and 36-45 year olds represent 21.9% and 22.8% of investors, respectively. Only about 3% of Chinese crypto investors are older than 46. The overall trend is similar to that in Europe, where 84% of the investors are under 45.
The report also found that 53.5% of Chinese cryptocurrency investors are college educated and 21.9% have postgraduate degrees. Investing in cryptocurrencies requires some basic knowledge about technology, specifically with regard to blockchain. Data shows cryptocurrency investors tend to be professionals in the technology, IT, and finance industries. The majority of investors are well-educated, which allows them to grasp the fundamentals of cryptocurrency investments.
The majority of Chinese crypto investors qualify as medium to high income, as about 70% of them earn more than CNY 10,000 a month. Just under a quarter, or 23.9%, of the investors make more than CNY 30,000 a month.
In summary, Chinese cryptocurrency investors are generally young, well-educated, wealthy males, and Babel Finance’s findings about Chinese investors are consistent with those about the United States and Europe.
Investment Strategy
81.3% of the investors in China bought their cryptocurrencies within the last three years, after the 2016 initial coin offering (ICO) bubble which attracted a lot of attention on cryptocurrencies. The media coverage helped drive massive investments into cryptocurrencies, eventually leading them to to become an essential part of many Chinese investors’ portfolios.
Bitcoin was the world’s first, and is still the most widely known, cryptocurrency. Satoshi Nakamoto, the founder of cryptocurrencies, mined the first block on the chain, known as the genesis block, in 2009. 10 years later, Bitcoin is still the most popular cryptocurrency to most Chinese investors, as 86.7% of survey respondents said it is part of their portfolio. Other popular cryptocurrencies include Ethereum, owned by 57.8% of respondents, stablecoin USDT, owned by 50.6% of respondents, and EOS, owned by 41% of respondents.
When asked why they buy cryptocurrencies, 84.3% of the investors noted feeling positive about the long-term profitability of cryptocurrencies. This is in part due to the fact that the total circulation amount of most cryptocurrencies is fixed. For example, there are only 21 million Bitcoins in total, which means cryptocurrencies are deflationary assets like gold or silver. About 25% of the investors chose cryptocurrencies as a hedge against crashes in traditional assets, while another 25% noted they invested for short-term returns. Due to the recent China-U.S. trade tensions, cryptocurrencies, along with gold, have become top hedges. Professor Panos Mourdoukoutas from Long Island University thinks Bitcoin is taking gold’s place as a new hedge against global financial uncertainty, and it has become even more popular among investors over the last couple years. The Chinese are not the only ones who buy cryptocurrencies for their profitability and protection, so have Americans.
The value of Chinese-held cryptocurrencies is substantial. According to Babel’s report, about 33% of Chinese investors have spent between CNY 100,000 and 500,000 on cryptocurrencies. 20.5% of the investors boast cryptocurrency portfolios valued at over CNY 1,000,000. When comparing crypto investments with traditional investments, the former represent a large portion of survey respondents’ total portfolios. Among those who invest in cryptocurrency, more than half have portfolios that are made up of more than 30% of their total investment. This means cryptocurrencies have become a normal investment option for many people.
Cryptocurrency prospects for the next 12 months
Chinese cryptocurrency holders share a positive outlook about the future of digital currencies. Though the current Bitcoin price is right around USD 10,000, the survey data reveals that 32.4% of investors predict that the price will exceed USD 30,000 at some point during the next 12 months. 26.9% are less optimistic but think the price will reach between USD 15,001 to 20,000. There is some rationale behind these predictions: The more people who invest in Bitcoin, the wider the cryptocurrency’s recognition gets.
On June 18, 2019, Facebook revealed whitepaper of its Libra cryptocurrency, which signaled that the big players have started to join the cryptocurrency field. Libra will help investor confidence in cryptocurrencies across the board. Prior to June 18, Bitcoin’s price was below USD 9,000, but after the announcement its price increased to USD 12,576.
It’s clear that the stage is set for Bitcoin’s price to increase. More than 80% of Bitcoins have been mined, and the public is more aware of the scarcity and halving of the rewards for mining cryptocurrencies. Cryptocurrencies are created by solving complex mathematical equations. In return for figuring out the math problems, miners receive some Bitcoins as a reward. In the beginning, the reward was 50 Bitcoins per solution, but every 4 years the reward is cut in half. Currently, the reward is 12.5 Bitcoins, and the next halving will take place in May 2020. When more miners hold cryptocurrencies, they make fewer coins available for transactions, and this explains why the price of bitcoin will increase in the long term.
Challenges for cryptocurrencies
Inadequate education is the main reason why people choose not to invest in cryptocurrencies. According to the survey, half of respondents still think cryptocurrencies are a bubble. For those who have thought about investing in cryptocurrencies, 53.8% of them don’t know how to buy them. People also need more reliable and safe platforms to ensure the safety of their transactions.
(Top photo from Pixabay)
