“If I had sold the whole thing, I would have had a quarter of a million pounds,” Duncan* says ruefully of the staggering value of his cryptocurrency holdings earlier this year.
Like many amateur investors, the 47-year-old former elementary school teacher got into crypto in a big way during the coronavirus pandemic, investing his life savings in a portfolio that was rising in value and that he believed would give him would allow entry into the stairwell of the property.
“He wanted to get to $500,000 (£414,000), then take half out. He had over $300,000 at Christmas,” says Duncan.
However, speaking from his home in Edinburgh, he confesses to having lost almost everything in the recent digital asset market crash. He is left with a portfolio valued (at the time of writing) at around £4,000, a fraction of the estimated £40,000 he invested. He remains optimistic: “I have friends who have lost eight-figure sums of money.”
Duncan is one of a growing number of Britons investing in digital assets. As of early 2021, approximately 2.3 million people in the UK had cryptocurrency investments, according to research from the Financial Conduct Authority (FCA) published last year, which is arguably still the most comprehensive official study of cryptocurrency. this type. Clearly, the number will have increased since then.
The FCA said then that the profile of crypto investors was skewed towards men over 35 and social grade AB, with a median of around £300, suggesting that many people had only “dipped their toe in the water” instead of investing your life savings.
The study revealed that cryptocurrencies had become more normalized, with fewer people seeing them as a “gamble” and more as an alternative or complement to mainstream investments. While ownership is on the rise, the FCA study, prior to this year’s global cryptocurrency crash, noted a declining level of understanding, suggesting that some did not fully understand what they were buying.
Alice Haine, a personal finance analyst at investment platform Bestinvest, says that cryptocurrencies are still evolving as an asset class and are a more speculative investment than investing in the stock market.
“The sharp declines seen in crypto stocks were partly a reflection that it is a market, unlike stocks, that is dominated by retail investors,” he says. “With fears of inflation and recession rising, many investors liquidated their holdings fearing further price declines, but also to bolster bank balances and savings accounts to help them survive the cost-of-living crisis.
“Any investor considering adding cryptocurrencies to their portfolio should be fully aware that it is a hugely volatile market, with price often being extremely unpredictable.”
As more small investors get involved, the government is changing the law to place ads for crypto assets under the same rules as other financial promotions like stocks, shares and insurance products. The move follows concerns about misleading cryptocurrency advertisements.
Meanwhile, MPs from the Treasury select committee recently launched an inquiry into the role of crypto assets in the UK.
“In recent months, the value of most crypto assets has fallen dramatically,” Mel Stride, chairman of the committee, said last month. “We will be looking into the opportunities and risks that crypto presents, where additional regulation may be required, and the lessons the government can learn from other countries.”
Duncan was introduced to Bitcoin by a friend in the early 2010s, when the value of the cryptocurrency was in the $100s. He watched his value take off in 2017, and when he topped $10,000, he thought, “This must be legit. I have to start buying it.
He returned to the UK in 2014 after teaching abroad for over a decade and found that many of his friends had settled down and bought houses.
“I had a fun life and didn’t save for the future…Crypto was my chance to catch up.”
In 2017 he was investing £100 “here and there” but in 2018 when the market crashed he stopped. “I was still interested in cryptocurrencies and the idea that you could control your financial destiny instead of just trying to save money.”
As of 2019, he returned to investing more regularly, and by the following year he was saving £400 a month. It was developing into a healthy nest egg. His first investments were in bitcoin and ethereum, but in 2021 he entered Luna and owned “2,000ish” coins that, in May, fell in value from $85 to less than $1.
The idea of decentralized finance, or “DeFi,” promoted in crypto circles, appealed to a worldview shaped by the 2008 financial crisis.
“You can do things in DeFi that you can’t in the traditional financial system,” says Duncan, giving the example of how easy it was to borrow against crypto compared to the process involved in getting credit on the street.
Duncan admits that he stopped maintaining his spreadsheets once he started getting it right. “Even if he had been paid until April, he would have had a quarter of a million,” he says. “No one saw it coming. Actually, that is not true. People saw it coming… the bubble he was in didn’t see it coming.”
The magnitude of Duncan’s losses was “stressful” and he has returned to live with his family. “You know there are various stages of grieving or whatever… Denial was definitely one of the stages, but then you accept it. All the paper profits that he had, they’re gone, that’s in the past.”
Now he is “reluctant to sell anything… Just because if I do, that means a loss.”
He no longer teaches and despite his devastating losses, he remains convinced that cryptocurrencies will recover, so much so that he is pursuing a career in the industry.
After all, he says, people lose money in the stock market all the time. On social media, popular refrains among crypto investors include “we’re still early” and “WAGMI… We’ll all make it.”
Duncan adds, “We’re still early.”
* not his real name
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