The cryptocurrency market is still in its infancy, and the overpowering sense of possibility is strong. The range of attitudes toward crypto is generally broad, but recent surveys shed light on certain inclinations one way or another. On one hand, we see beginners who venture into projects they fail to fully grasp, and on the other, we see aspirants to crypto investing who question their capability of getting involved.
At one end of the spectrum are the crypto dilettantes, where interestingly, understanding and confidence tend to be inversely correlated. Last year, Dutch bank ING interviewed around 10,500 people in Europe about cryptocurrencies. Of the 13% with the lowest crypto knowledge, 80% demonstrated high or medium confidence in its future. The cognitive bias these findings suggest makes for an uncomfortable journey toward crypto mass adoption. Still, I believe that interest, whether matched by sound understanding or not, is a step in the right direction.
An earlier survey that polled 1,000 online investors reveals that 44% of respondents were not trading crypto because they felt they lacked the proper education. More than half of the women surveyed, in particular, admitted that a shortfall in knowledge was the biggest barrier to entry into crypto investing, even though their interest in doing so matched that of the men. A separate poll conducted by Grayscale last year finds that U.S. investors would be more likely to invest in Bitcoin (BTC) if they were more knowledgeable about the asset, relative to stocks and bonds.
This limitation no longer goes unnoticed in the space. CoinMarketCap’s interim CEO, Carylyne Chan — who recently resigned — shared she was leaving the cryptocurrency data website with the hope that it will play a more prominent role in cryptocurrency education.
A lack of financial education
Falling into the FOMO or being frozen by the FUD is simply questioning your own judgment. Would either of these externally imposed calls to action or inaction ever go as viral if people were simply better informed?
The blame is not entirely on the individual, however. With reputable publications circulating articles on how you are the only one not striking it rich on BTC, there’s no wonder people are rushing to create a wallet. Yet the only acronym you should swear by is DYOR before you “dip your own resources” into “the next Bitcoin.” This whole narrative leads to ill-considered investments and propels the search for a quick crypto buck.
As a result of the low barriers to entry, inexperienced investors without a financial background venture into the crypto space in expectation of instant returns. It is a legit strategy to reap profits off of day trading, but it is unfair and short-sighted to make the entire industry about that. How do we expect traditional financiers and those coveted “billionaire’s approach” proponents to take digital assets seriously, given that for most crypto investors, long term is a week?
The perceived dichotomy between digital and traditional finance can be debunked by showing potential investors that basic financial principles are a stepping stone for successful crypto involvement and that a misunderstanding about an ordinary process in corporate finance can put all players involved at a loss.
One feature that occurs in both types of finance is dividends payments. This year, many companies globally tried to distribute dividends against a backdrop of bankruptcy filings and record unemployment in the markets. Those with a solid financial understanding would be aware that while the control over dividends policies falls entirely under the company distributing them, the share/token price is entirely market-driven, and crypto markets are notoriously more volatile. Dividend payments impact price: Typically, a rise is expected on the announcement date and a decline by a similar amount on the ex-dividend date.
Understanding these principles when expecting dividends from crypto…