2017’s cryptocurrency investment craze, synonymous with constant record-breaking days and a peak Bitcoin price of $19,783, was at its pinnacle almost a year ago.
The pandemonium has died down since that time, with Bitcoin coming back down to Earth and settling in at a price around $6,500. But don’t think that virtual currency is going anywhere anytime soon.
Bitcoin, in addition to other cryptos like Ripple and Ethereum, continue to experience high trading volume. Coinbase, the leading virtual currency exchange and poster child of the crypto-movement, was recently valued at $8 billion.
One of the biggest thorns in the side of crypto seems to be its dark web aura and a lack of understanding, or even acceptance, from the everyday, institutional investor. For example, while a few of the major brokerage accounts offer futures trading, none of them currently offer a direct way to purchase virtual currencies like Bitcoin and Ethereum.
Is there an untapped market for cryptocurrency trading amongst traditional investors that may not exist now, but might if the option was easily accessible?
To answer this, LendEDU, in collaboration with The Daily Hodl, surveyed 1,000 adult Americans that invest in the stock market through a brokerage account that does not offer direct cryptocurrency investments. These respondents are also not currently invested in virtual currency.
Upon completion of the survey, we came away with a few key findings that included:
- 52% of respondents would likely use their brokerage accounts to invest in cryptocurrency if the option existed. 59% of those consumers would even scale back their traditional investments to invest more heavily in cryptocurrency.
- 41% of respondents would trust a traditional brokerage more than Coinbase in handling their virtual currency investments, while 14% would trust Coinbase more. Further, 39% would trust Amazon more than Coinbase in handling crypto-investments, while 15% opted for Coinbase.
- 48% of poll participants would likely consider moving their portfolio to a brokerage account that allows them to invest in both cryptocurrency and traditional investments.
Full Survey Results
1. Which of the following brokerages do you currently have an account under? (Select all that apply)
a. 16% of brokerage accounts were “E-Trade”
b. 17% of accounts were “Fidelity”
c. 11% of accounts were “TD Ameritrade/Scottrade”
d. 10% of accounts were “Charles Schwab”
e. 4% of accounts were “Interactive Brokers”
f. 7% of accounts were “Merrill Lynch”
g. 7% of accounts were “Vanguard”
h. 4% of accounts were “TradeStation”
i. 7% of accounts were “Edward Jones”
j. 5% of accounts were “Ameriprise Financial”
k. 12% of accounts were “Other”
2. If it was offered, would you invest in virtual currency through the brokerage account(s) you have from above?
a. 23% of respondents answered “Yes, definitely”
b. 29% of respondents answered “Most likely”
c. 26% of respondents answered “Not sure”
d. 16% of respondents answered “Most likely not”
e. 6% of respondents answered “Definitely not”
3. (Asked only to those who answered A or B to Q2) Would you scale back your more traditional investments in order to invest more heavily in virtual currency?
a. 29% of respondents answered “Yes, definitely”
b. 30% of respondents answered “Most likely”
c. 26% of respondents answered “Not sure”
d. 14% of respondents answered “Most likely not”
e. 1% of respondents answered “Definitely not”
4. (Asked only to those who answered A or B to Q2) Would you be OK with your brokerage account making a commission off of your virtual currency purchases?
a. 54% of respondents answered “Yes”
b. 21% of respondents answered “No”
c. 21% of respondents answered “Not sure”
d. 4% of respondents answered “I’d rather not say”
5. Are you disappointed that your brokerage account does not offer a virtual currency investment option?
a. 32% of respondents answered “Yes”
b. 42% of respondents answered “No”
c. 26% of respondents answered “Not sure”
6. Would you trust a more traditional brokerage in handling your virtual currency investments as opposed to a virtual currency-specific exchange like Coinbase?
a. 41% of respondents answered “I would trust the more traditional brokerage”
b. 14% of respondents answered “I would trust the virtual currency-specific exchange like Coinbase”
c. 23% of respondents answered “I would trust both equally”
d. 22% of respondents answered “Not sure”
7. Would you trust Amazon, a non-brokerage tech company, in handling your virtual currency investments as opposed to a virtual currency-specific exchange like Coinbase?
a. 39% of respondents answered “I would trust Amazon”
b. 15% of respondents answered “I would trust the virtual currency-specific exchange like CoinBase”
c. 19% of respondents answered “I would trust both equally”
d. 27% of respondents answered “Not sure”
8. Which existing method/platform would you choose to make an investment in virtual currency?
a. 38% of respondents answered “Mobile app (i.e Robinhood Crypto, Coinbase)”
b. 22% of respondents answered “Desktop platform (i.e. Robinhood Crypto, Coinbase)”
c. 24% of respondents answered “In person, with a qualified financial advisor (i.e. Fidelity)”
d. 16% of respondents answered “Not sure”
9. Do you think your brokerage will add virtual currencies in the future?
a. 25% of respondents answered “Yes, definitely”
b. 34% of respondents answered “Most likely”
c. 32% of respondents answered “Not sure”
d. 6% of respondents answered “Most likely not”
e. 3% of respondents answered “Definitely not”
10. Would you consider moving your portfolio to a brokerage that allows you to invest in cryptocurrency as well as traditional investments?
a. 21% of respondents answered “Yes, definitely”
b. 27% of respondents answered “Most likely”
c. 30% of respondents answered “Not sure”
d. 18% of respondents answered “Most likely not”
e. 4% of respondents answered “Definitely not”
11. Would you ever invest in virtual currency even if your brokerage did not offer it as an investment option?
a. 18% of respondents answered “Yes, definitely”
b. 26% of respondents answered “Most likely”
c. 31% of respondents answered “Not sure”
d. 19% of respondents answered “Most likely not”
e. 6% of respondents answered “Definitely not”
12. Do you believe that investing in virtual currency would make for a more diversified investment portfolio?
a. 56% of respondents answered “Yes”
b. 21% of respondents answered “No”
c. 23% of respondents answered “Not sure”
Observations & Analysis
Majority of Traditional Brokerage Account Holders Would Jump On Crypto If it Was Offered…
Respondents that participated in this survey were actively invested in the stock market through a standard brokerage account like E-Trade, Fidelity, or Merrill Lynch. However, none of them were invested in cryptocurrency at the time of polling, nor did their brokerage account directly offer crypto-investments.
With that said, many poll participants indicated that they would jump on the opportunity to invest in virtual currency if the option was made available to them by their current brokerage account.
Perry Woodin, the founder of software services company Node40 that focuses on blockchain accounting and compliance, believes many investors will get right into crypto investments: “Like any investment, it’s all about risk vs. reward. Investors with more risk tolerance will certainly invest in cryptocurrency. Investors want to make money, and if their risk is properly balanced, cryptocurrency investment could be very attractive.”
Amongst the respondents that indicated they would likely invest in virtual currency if their brokerage account made it available, 59% of them would presumably scale back their more standard investments so that they can load up more heavily on crypto.
Woodin explained how a scenario like this could unfold: “Once cryptocurrency is offered as an investment option, other risky, but traditional investments could take a small hit. Investors who are not risk-averse are always looking for the next big thing. New asset types don’t come along very often but they always generate excitement.”
The results of Question 2 becomes a bit more intriguing when analyzed in tandem with Question 11. The latter revealed that a considerably less number of respondents were interested in investing in cryptocurrency if it was not offered by their brokerage account; a combined 44% of poll participants indicated that they would likely invest in virtual currency even if it was not offered by their brokerage.
Cross-reviewing the results of these questions could lead to two conclusions. First, adult American consumers really want to invest in cryptocurrency, but they are less enthusiastic to do it outside the assuredness of institutional investing. If a traditional brokerage like Fidelity began offering crypto investment, a large proportion of non-crypto investors would be willing to jump into virtual currency because of the trust that is attached to a financial company like Fidelity or Merrill Lynch.
“The survey responses reveal a strong interest in cryptocurrencies, and that’s really encouraging for all of the developers out there who are working on new systems and networks based on Bitcoin, Ethereum, Litecoin, Dash and all the rest. Future crypto investors can shape the next seismic technological shift, supporting a growing number of organic platforms using peer-to-peer cryptocurrencies. That will lead to more people participating in the economy and, hopefully, more people prospering,” says Laurene Williams, editor of The Daily Hodl.
Second, traditional brokerages have the potential to profit greatly by adding virtual currency investments directly to their platforms. Amongst those respondents that would likely invest in crypto if their brokerage offered it, 54% would be OK with the brokerage making a commission off their cryptocurrency purchases, while 21% were unsure and only 21% would not be OK with this.
The majority of potential virtual currency investors would be fine with a brokerage commission on their crypto investments, but many of them will only invest in the cryptocurrencies like Bitcoin or Ethereum if it was offered by their institutional investor, and likely not through an exchange like Coinbase.
Through both their reputation as a trusted financial institution that would push many consumers to invest and the ability to make a commission off of crypto investments (Coinbase does not currently charge any fee), traditional brokerage accounts have a lot to gain by offering virtual currency investments.
…And the First of These Brokerages That Jumps on Crypto Could Become Quite Popular
It has already been discussed how any traditional financial brokerage stands to make a lot of money and drive a lot of business if they began offering cryptocurrency investments.
Right now, the only platform that is offering the ability to invest in both cryptocurrency and traditional stocks is Robinhood, however, the crypto feature is only available in 25 states. Additionally, one would not exactly call Robinhood an institutional brokerage like Merrill Lynch, as it is more of a new-age, fintech app that caters to smartphone use.
Some of the brokerage accounts noted earlier allow a user to invest in cryptocurrency futures or indirectly invest in Bitcoin through secondary platforms, but none offer a direct path to investing in a cryptocurrency like Ethereum or Bitcoin.
So, how would the first traditional financial brokerage fare if they rolled out a platform that allowed a consumer to become invested in both cryptocurrencies and regular stocks?
Probably quite well…
A combined 48% of survey participants either indicated that they would “definitely” or “most likely” consider moving their portfolios to a brokerage that allows them to invest in cryptocurrency, in addition to traditional investments.
30% of respondents were not sure as to what they would do, while only a combined 22% of survey takers would either “most likely not” or “definitely not” switch over their portfolios to the most diverse brokerage account.
On the idea of traditional brokerages offering the option to invest in cryptocurrency directly, Woodin said, “All brokerage firms compete for customers. It may still take years before we see the likes of E-trade or Charles Schwab offer cryptocurrency investment options, but it will happen. The reason for the broad time horizon is because the regulatory guidance these traditional firms need to feel secure has not come to fruition.”
While there would certainly be a lot of red-tape, logistics, and various levels of approval needed before any traditional brokerage account began offering a virtual currency investment option, the first institution to do it will likely see a massive influx of new customers and plenty of profit.
“Regulators are either proceeding with caution or dragging their feet. In addition, the custodial question needs to be solved from a technological and legal perspective. While there are companies working on securing cryptocurrency assets for large players, the solutions to date have not been enough to satisfy the regulatory agencies,” concluded Woodin.
Investors Appear to Trust Both Brokerages & Amazon More Than Virtual Currency Exchanges Like Coinbase
As discussed in the first section of the analysis, it appears that there is a major trust issue, even if it is unwarranted, between traditional investors and virtual currency exchanges like Coinbase. That is likely why more poll participants were open to making crypto investments through their brokerage accounts than those that indicated they would still invest in cryptocurrency even if it was not offered by their brokerage.
We thought it would be interesting to see if respondents would be more willing to trust their brokerage in handling virtual currency investments instead of a crypto-specific exchange like Coinbase. Further, since Amazon is seemingly involved in every imaginable economic sector, we pitted Amazon against Coinbase.
Once again, the results to question seven further show why a trust issue seemingly exists between the everyday investor and cryptocurrency exchanges like Coinbase. The virtual currency has not fully made its way into the mainstream, nor has it been entirely accepted by the by-the-book investors. To that point, it is likely that a lot of American consumers that have been invested in the market for quite some time do not even know what Coinbase is.
This is why brokerage accounts stand to prosper so much if they soon begin allowing direct cryptocurrency investments. Many consumers would first go to their brokerage if they wanted to invest in crypto; the perceived trust outweighs the fact that Coinbase excels in virtual currency investments.
41% of poll participants said they would trust the traditional brokerage more than a virtual currency-specific exchange like Coinbase, while 14% would trust Coinbase more. Another 23% stated they would trust both equally, and the final 22% were undecided.
Something even more shocking, although it still plays into the lack of trust notion that exists with virtual currency companies, is that nearly just as many respondents would trust Amazon in handling their crypto investments as opposed to an exchange like Coinbase.
39% of respondents answered that they would place more trust in Amazon than an exchange like Coinbase in handling their virtual currency investments, while 15% opted with the opposite. Further, 19% indicated they would have an equal level of trust in both, while 27% were unsure.
Interestingly, we previously ran a survey that found 51.7% of American respondents would be open to the idea of using an Amazon-created cryptocurrency to make purchases on Amazon. Maybe it should be Amazon that beats the traditional brokerages to the punch and begins offering virtual currency investments…
Despite this data, Woodin believes that the big cryptocurrency exchanges like Coinbase are in no danger: “I don’t think the existing large cryptocurrency exchanges like CoinBase and Gemini will suffer when the traditional brokerage firms begin to offer cryptocurrency as an investment. Traditional brokerage firms are going to attract investors who don’t care to hold the asset. These investors will be in it for the potential returns and may not have any interest in holding and securing the asset.”
“Exchanges like CoinBase and Gemini will continue to service both investors and individuals or institutions who see value in the utility of cryptocurrency,” said Woodin.
All of the data that can be found within this report derives from an online poll commissioned by LendEDU and conducted online by online polling company Pollfish. In total, 1,000 adult Americans ages 18 and up were surveyed for this particular poll. Respondents that met the age requirements were found via Pollfish’s age filtering feature. Respondents also had to be currently invested in the stock market, but not virtual currency. Further, they had to be making their investments through a brokerage account that does not offer virtual currency investments. These poll participants were found via a screener question. If respondents met the criteria, they were selected at random from Pollfish’s online user panel of over 100 million. This online survey was conducted over a five day span, starting on September 21, 2018 and ending on September 25, 2018. Respondents were asked to answer all questions truthfully and to the best of their abilities.
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