Grayscale Bitcoin Buy Explained – Investor Study

Investors show increased interest to buy Bitcoin, according to a new study carried out by “Grayscale Investments“, the largest crypto asset manager in the world. The report focuses on the US, but the trends are visible on all continents.

Grayscale - Buy Bitcoin 2019 Investor Study
Source: Grayscale – Bitcoin 2019 Investor Study

About 36% of US Investors Are Interested in Buying Bitcoin

Many commentators claim that Bitcoin has a narrow group of fans within the investment community. However, Grayscale discovered that more than a third of US investors were actually thinking about buying cryptocurrency, making reference specifically to buy Bitcoin. Considering that there are about 60 million investors in the US, it means that the largest cryptocurrency by market cap has over 20 million potential buyers there.

Moreover, 83% of US investors were ready to invest small amounts in BTC now, analyze how their investment goes, and eventually add the coin to their portfolio at a later date. Investors are mostly attracted by Bitcoin’s scarcity and potential for growth.

The study was carried out by Grayscale Investments in collaboration with Q8 Research and involved 1,100 American investors. The authors said:

“As the digital currency asset class continues to mature, it is critical that analysts, investors, advisors, institutions, media, and the general public understand the prevailing sentiments surrounding Bitcoin as an investment. This survey represents some of the first publicly shared data on retail investors’ perceptions of Bitcoin and the opportunities it presents.”

Source: Grayscale Report

Who Are Potential Investors in Bitcoin?

Grayscale created the profile of potential investors by political affiliation, income, and gender. The main conclusion drawn from the overall picture is that Bitcoin investors are no different than the average investors surveyed during the research. Some slight variations relate to age, experience, and risk tolerance. For example, Bitcoin investors tend to be younger than the rest of investors, with an average age of 42 compared to 45 for average investors. Also, those who show interest in Bitcoin are generally a bit more experience and have higher risk-tolerance than the rest of investors.

When it comes to political affiliations, 42% of Bitcoin-interested investors feel represented by the Republican Party while 37% resonate with the Democrats. A similar proportion can be noticed with average investors.

What’s interesting is that there is a visible discrepancy between Bitcoin male and female investors, with the former group accounting for 57%. However, this percentage difference is interpreted differently by authors, who pointed out that this ratio shows that there are way more women interested in Bitcoin than suggested by media. The document reads:

“A majority of women (80%) and men (78%) interested in Bitcoin as an investment are attracted to its growth potential, while both women and men (77% versus 76%) appreciate the fact that investment returns can be accessed at any time.”

Source: Grayscale Report

Here is are Grayscale’s main findings on investors’ profiles:

Grayscale: Average Investor vs Investor Ready to Buy Bitcoin - HashFeed
Source: Grayscale – Average Investor vs Bitcoin Investor

In other words, there isn’t anything special about the profile of those interested in the cryptocurrency. Potential Bitcoin investors are generally middle-aged, suburban, and middle-class. The majority of them are parents (70%), and almost half of them earn less than $100,000 per year. Interestingly, they are most often optimistic, probably because they are more open to progress and economic transformations.

Another worth-mentioning aspect is that Bitcoin-interested investors tend to read more, especially financial news. For example, less than 25% of the average investors polled by Grayscale read Forbes, and that figure jumps to 49% when it comes to Bitcoin-oriented investors. Thus, the latter ones are more financially engaged and informed. In fact, this is an expected tendency given that Bitcoin is regarded as a new asset type.

In many jurisdictions around the world, there is still no legal framework that would regulate it. Staying up-to-date with the main trends in the cryptocurrency market is very important, which is why Bitcoin-interested investors are more likely to read CNBC, the Wall Street Journal (WSJ), Bloomberg, Motley Fool, and Fortune, among others.

Grayscale: Investors Ready to Buy Bitcoin Consume More Financial News - HashFeed
Source: Grayscale – Investors Ready to Buy Bitcoin Consume More Financial News

While Bitcoin is probably one of the most volatile assets out there, those who show interest in it are not scared at all. In fact, Bitcoin-interested investors don’t consider the coin as an exceptionally risky bet. On the contrary, they regard it as an investment that involves moderate risk and the potential for generous returns. 42% of these investors see BTC as both a short-term and long-term option.

Bitcoin Goes Mainstream

As mentioned, Bitcoin isn’t only the topic of the crypto community anymore. It has entered deep into our society. The cryptocurrency is discussed at the highest levels by politicians, regulators, and decision-makers. The report notes:

“The research study showed that those interested in investing in Bitcoin largely fit the profile of the average U.S. investor. While Bitcoin-interested investors are slightly more experienced and risk-tolerant than average investors, they otherwise have similar political views, income levels, and careers as the broader pool of surveyed investors.”

Source: Grayscale – Bitcoin 2019 Investor Study

Bitcoin has also reached the pop culture, with many celebrities like actors, singers, and sportsmen endorsing or even praising the coin.

Bitcoin has also reached the pop culture, with many celebrities like actors, singers, and sportsmen endorsing or even praising the coin.

Rapper Soulja Boy – with his real name DeAndre Cortez Way, bragged about his crypto gains in a song titled “Bitcoin.” The lyrics say:

I made 100 racks off of Bitcoin,
You can catch me trapping with the Bitcoin,
You can catch me running up the Bitcoin,
I spent 6,000 on the Bitcoin.

Source: Bitcoin News – Rapper Soulja Boy Releases New Single Titled ‘Bitcoin’

Rapper 50 Cent – another US rapper, had reportedly made about $8 million by accident, though he later rejected these claims when things got to taxes.

Actress Gwyneth Paltrowshowed support for cryptocurrencies when her publication called “Goop” posted an article describing the pros of Bitcoin and crypto.

British Singer and Model Melanie Brown – better known as Mel B, allowed fans to buy her single with Bitcoin. The former Spice Girls member said:

“I love how new technology makes our lives easier, and to me that’s exciting. Bitcoin unites my fans around the world using one currency. They can just pay using bitcoins!”

Source: CoinDesk – Mel B Spices Up Record Sales With Bitcoin

Actor Hugh Laurie – who is well-known for his role in House series, invested $5,000 about four years ago after a friend of him suggested to do so.

Boxer Mike Tyson – Bitcoin has been noted demand among sportsmen as well. In 2015, US boxer Mike Tyson launched a network of Bitcoin ATMs in Las Vegas, saying that he was proud to be part of the BTC revolution.

Congressman Patrick McHenry – The oldest cryptocurrency out there has found supporters even among politicians, who are generally quite skeptical of the coin’s potential to transform the financial system. At the beginning of July, American Congressman Patrick McHenry told CNBC that there was no way someone could destroy Bitcoin:

I think there’s no capacity to kill Bitcoin. Even the Chinese with their Firewall and their extreme intervention on their society cannot kill Bitcoin. So, distributed ledger, full and open, in the essence of Bitcoin, as a first mover in the space, the developer of this technology.”

Buying Bitcoin vs. Gold

Going back to Grayscale’s report, the survey also touched upon the similarities between Bitcoin and gold, as the former is often called digital gold. Even though the precious is physical and Bitcoin is virtual, there are many fundamental similarities between the two, which relate to scarcity and purpose of investment. The research also discovered an overlap between investors who are attracted by both.

Thus, 69% of potential Bitcoin investors consider gold as a good investment option, with 65% admitting that they would definitely or probably invest in the metal at some point. On the other side, when it comes to average investors, 55% said that they regarded gold as a good investment, with 51% of them showing readiness to invest in it.

This overlap shouldn’t surprise you at all, as both Bitcoin and gold are often considered safe-haven assets that protect investors from the negative impact of unexpected financial crises, trade wars, political tensions, and any event that could destabilize the financial world. Both assets are great at preserving value in the long-term.

Interestingly, Grayscale itself sees more advantages in Bitcoin rather than gold. The crypto asset manager even launched the #DropGold initiative, encouraging investors to bet on the cryptocurrency instead of gold. You probably remember the funny ad:

In July of this year, Grayscale CEO Barry Silbert revealed that a second “Drop Gold, Buy Bitcoin” ad was on the way.

Year-to-date, Bitcoin has outperformed gold by a lot.

TradingView Coinbase BTC/USD "Drop Gold, Buy Bitcoin" - HashFeed
Source: TradingView – Coinbase Bitcoin BTC/USD

The same discrepancy can be seen on the five-year chart. The only year when Bitcoin investors could record a negative return was in 2018.

Also, it’s interesting to see how Bitcoin’s scarcity is increasing as the mining reward is reduced every few years. On the other hand, gold production has grown over the last few years.

Earlier this month, Barry Silber said that the US would face a massive wealth transfer that would move from baby boomers (between 1951 and 1969) to Millenials and Generation X. Thus, Bitcoin might become among the most important store of value (SoV) assets within the next 25 years. He said during the 2019 Mid-Year Review Webinar:

“Over next couple of decades, there is $68 trillion of wealth that’s held by baby boomers and the older generation, in the US alone, that’s going to be handed down to Generation X and Millenials. My theory is that whatever of that 68 trillion that is currently in gold, I don’t think it’s going to stay all in gold.”

Source: Grayscale – 2019 Mid-Year Review

Bitcoin Investment Risks

While 36% of US investors are ready to invest in Bitcoin, 30% of them are neutral, and 34% are not interested at all. The main reasons to ignore the cryptocurrency relate to several risks associated with it. Specifically, the respondents were concerns about the following issues:

Hacking and Scams – the high number of crypto exchange heists and other frauds are scaring many investors and make them feel unsecure about the coin. 75% of all investors and 68% of Bitcoin-interested ones say that digital fraud is their main fear about the cryptocurrency.

No Regulation – while some Bitcoin fans don’t want to hear about regulatory oversight, ordinary investors are actually concerned about the lack of regulation. This is the second biggest problem with the cryptocurrency among both groups. Thus, 65% of all investors and 53% of those Bitcoin-interested ones are worried about an unregulated market

Lack of Proper Education – as mentioned, Bitcoin is a new asset type, and investors would like to know more about it, especially when blockchain – the technology underpinning it – is quite complex at this point. Most of the investors think that they don’t know enough about the coin to buy Bitcoin in a confident manner. 89% of the respondents admitted that they would more likely consider investing in the cryptocurrency is they had access to better educational resources.

Guidance – over 75% of polled investors said that they would feel more comfortable with investing in Bitcoin when dealing with an advisor (78%) or a reputable company (77%).

All in all, these risks and issues are real, though any developing technology and industry would encounter such impediments.

The Final Note

Currently, investors’ appetite to Buy Bitcoin is still high despite its volatility, a stagnant 2018, and regulatory pressure in countries like China, India, and even the US.

This can also be seen through Grayscale’s flagship product called “Grayscale Bitcoin Trust (GBTC)”, which has gained more than 190% in the second quarter of 2019. GBTC has been the best performing fund by a mile. During the same period, gold gained 9% while the S&P 500 index increased by 3.8%.

Currently, Grayscale has over $2.7 billion in assets under management. The company also invests in Ethereum, Ethereum Classic, Litecoin, XRP, Stellar Lumens, Zcash, and Bitcoin Cash. The company has attracted more and more investments week by week, according to its financial report published recently.

Grayscale Weekly Cumulative Inflow - HashFeed
Source: Grayscale – Weekly Cumulative Inflow