Investors flee crypto after ‘shocker’ year

“Last year was a definite shocker year in the industry,” Mr Titman said, adding that the slowdown in new investors wasn’t totally surprising.

“With what happened in crypto last year and in the broader macroeconomic environment, it was to be expected that it was going to slow.”

Rising interest rates and the cost of living are hitting mortgage-holding Generation X and low-income Generation Z in different ways. Investors across all age groups bar Baby Boomers were less likely to say they had plans to invest in crypto in the next year.

James Waters, 26, says he began investing in cryptocurrency due to its “get rich quick” allure, but hit pause on his portfolio in late 2021 amid increasing market volatility and cost-of-living challenges.

He originally invested around $5000 in Ethereum, Bitcoin and a couple of smaller and more volatile coins. His portfolio is now worth $2600.

He is not planning to cash out, as is confident it will increase in value again. But he did sell his smaller, more speculative coins, to invest predominantly in Ethereum.

“I realised that the [get-rich-quick] thing was a bit of a facade. You can still get rich, but you’re actively trading ... I like the word ‘volatile’. Crypto is volatile.”

Federal Treasury is expected to release a consultation paper detailing plans to regulate cryptocurrency in coming weeks. The goal is to prevent another FTX scandal, in which around $US8.7 billion in customer money was fraudulently drained from individual accounts before the company collapsed.

The YouGov study also estimated that 290,000 Australians pulled digital assets from their retirement funds in the last year, led by Generation X members. Across all age groups, the number of cryptocurrency holders with crypto in their super fell from 47 per cent to 39 per cent.

Mr Waters said the collapse of FTX “solidified” his decision not to put any more money in, and noted that while some of his friends continued to dollar-cost-average into cryptocurrency, most of them had also cooled on the asset class.

“I would say the confidence is down a bit right now, and also the cost of living is causing a squeeze on a lot of people including myself.”

A raft of banks began blocking payments to high-risk cryptocurrency exchanges recently, amid concerns that scammed money was increasingly being siphoned into cryptocurrency and was virtually impossible to retrieve.

Mr Titman said improved regulation was crucial to raising confidence in cryptocurrencies, noting that 50 per cent of those who haven’t purchased crypto cite a lack of regulation as their main reason.

Ray Osthmuller, an executive at another crypto exchange, Coinspot, said while activity had been consistent over the past financial year, investors were becoming more focused on the safety of their local exchanges following the collapses of FTX and Terra Luna in 2022.

“Ensuring the exchange of choice is regulated, audited and has a high level of security is proving to be at the forefront for Australian investors,” he said.