Chronicle: “Mom and Dad” investors have raised the level of technology, the collapse of crypto: McGiver

Orlando, Florida, May 12 (Reuters). than most.

A series of surveys and snapshots of investment flows show that retail investors have significantly increased their stocks in technology and cryptocurrencies, which are now more than ever tied to the dynamics.

When you first climb to the top of the hill, these are the markets that fall the fastest on the way down.

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According to Vanda Research, nine of the 10 largest stocks of the weighted average portfolio of retail investors are US technology exchanges and account for more than 50% of the total portfolio. The portfolio lost money, falling 31% from its peak in December.

The wildlife of cryptocurrencies may not be a natural habitat for retail investors, but they are exploring. A survey by Charles Schwab in the UK in March found that 57% of new investors own cryptocurrencies, and a Morgan Stanley poll published this week found that 31% of retail investors in the European Union own cryptocurrencies.

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Stocks of technology and cryptocurrencies seemed to be the best bet when the Federal Reserve and other central banks filled the world with cash, interest rates were close to zero, and governments sent out incentive checks.

But this is no longer the case. The global cash leak continues, the Nasdaq fell 30% from its November high and bitcoin fell 60%.

Eben Burr, chairman of Toews Asset Management, says retail investors want to buy yesterday, but the next thing they can get is to buy something that was good yesterday. And this is illogical and irrational.

“In the short term, the pain is more, 100%. If the market continues to fall, it will be too painful and retail investors will flee, ”said Eben Burr, chairman of Toews Asset Management. “Everyone has a turning point.”

“CAN’T LOSE”?

Institutional investors are now controlling the lion’s share of the universe of bitcoins and cryptocurrencies, but nominal holdings of retail investors are still higher than ever and growing.

A Morgan Stanley poll found that 16% of EU retail investors account for cryptocurrencies, more than real estate (14%), bonds (10%) and commodities (8%).

A poll conducted last month by eToro’s retail investment platform found that one in three retail investors plans to invest in cryptocurrency over the next 12 months, up from 18% in October. Even baby boomers are on board – 11% of people aged 55 and older plan to invest in cryptocurrency next year.

In a sense, this should not come as a surprise, given how much cryptography has been ingrained in the public consciousness.

In October, Hollywood star Matt Damon showed an ad for the crypto.com shopping app called Fortune Favors The Brave. And only this week, when cryptocurrencies fell and many stablecoins “knocked the ball”, former England footballer Michael Owen wrote on Twitter that his new non-demountable tokens (NFT) “will be the first not to lose their original value.”

Last week, U.S. Sen. Elizabeth Warren wrote to Fidelity Pension Fund to question the “compliance” of her decision to add bitcoin to her 401 (k) retirement plan because of “significant risks of fraud, theft and loss” of cryptocurrencies.

The current market turmoil has brought these problems to the fore. The blockchain research company Glassnode said on Monday that bitcoin for $ 33,600 puts 40% of investors under water.

Meanwhile, Shina Shah of Morgan Stanley notes that anyone who bought bitcoin last year is in the red when it trades below $ 28,000. On Thursday, it fell to $ 25,400.

Mom and pop investors may not be able to last long. US household debt rose $ 266 billion in the first quarter to $ 15.84 trillion. That’s $ 1.7 trillion more than at the end of 2019, before the pandemic.

Meanwhile, the surplus of household savings accumulated during quarantine, as government incentives are rapidly disappearing. The level of personal savings in the United States fell to 6.2% in the first quarter, the lowest level since 2013.

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But crypto enthusiasts like Anthony Scaramucci, SkyBridge’s founder and managing partner, see things differently. He compares today’s instability to the first days of Amazon’s stock, with several major declines during the first decade.

“Investors must be prepared to accept this. Everyone says they are long-term investors until they see short-term losses, “said former Trump’s director of communications, Reuters.

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(Here are the views of the author, a Reuters columnist.)

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Jamie McGiver; Additional contributions of Medha Singh in Bangalore; Edited by Andrea Ricci

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