Hong Kong SFC's "Virtual Asset Investment Behavior Report": Nearly 90% aware of high risks, seek short-term profits

A study on retail investors in 2023 conducted by the Investor and Financial Education Council (IFEC) in Hong Kong can be found in the "2023 Retail Investor Study" document.

70% of Hong Kong Investors are Familiar with Virtual Assets

A report indicated that approximately 1,000 face-to-face interviews were conducted with retail investors aged 18 to 69 who had held or traded specific common financial products in the past 12 months. The survey was conducted in mid-June to early July 2023.

A significant portion of the investors, 71%, were familiar with virtual assets or related products, with cryptocurrencies being the most recognized at 70%. Cryptocurrencies were also the most held virtual assets, followed by stablecoins and non-fungible tokens (NFTs).

The report provided statistics on the awareness and holdings of different virtual assets among retail investors in Hong Kong in the past 12 months.

Youthful working professionals aged 18-29 showed a much higher interest in virtual assets, with as many as 15% indicating they had held virtual assets in the past year, a significant increase from 6% in 2021 and 4% in 2019.

Nearly 90% Consider Cryptocurrencies High Risk

Among the 707 individuals surveyed, 88% believed that cryptocurrencies were high-risk, a proportion higher than all other traditional financial products.

Most Hong Kong Investors Still Prefer Exchanges

Among the interviewed Hong Kong investors, cryptocurrency exchanges/online trading platforms remained the most popular channel for trading virtual assets, even after the FTX incident. Cryptocurrencies are still the most sought-after virtual assets for investors in the next 12 months.

Reasons for Investment: Speed, Belief, FOMO

For investors looking to continue investing in cryptocurrencies, three main reasons were cited simultaneously: seeking short-term profits, believing in the future of virtual assets in finance, and fear of missing out (FOMO):

Risks of Cryptocurrencies: Price Volatility

Investors' main concern regarding virtual assets was price volatility. Other worries included wallet security, cyberattacks, and liquidity risks.

Other Insights

• Awareness of New Licensing System: Awareness levels of the new licensing system for virtual asset trading varied, with higher awareness among virtual asset investors.
• Investment Intentions: Some investors lack interest in virtual assets due to perceived risks, limited knowledge, and lack of regulation.
• Market Outlook: Virtual asset investors generally hold optimistic views on the importance and potential long-term capital gains of virtual assets in the future.
• Storage Platforms: Despite the FTX bankruptcy, trading platforms remain the most common choice for storing virtual assets, with significant use of hot wallets, cold wallets, and third-party custody.
• Factors in Choosing Trading Platforms: Security measures, fees/rates, and regulatory oversight are the primary considerations when choosing a trading platform.

This report from the Hong Kong Investment Funds Association provides insights into the trends, concepts, and behaviors of retail investors regarding cryptocurrencies and virtual assets. For more information, please visit here.