The European Central Bank published a new study on cryptocurrencies, stating that the space’s “stellar growth” highlights the necessity of knowing its risks.
While the paper, titled “Decrypting financial stability concerns in crypto-asset markets,” is primarily a critique and warning of the industry, it does contain some encouraging metrics.
According to the ECB, based on the results of its recent Consumer Expectation Survey (CES) from six larger eurozone nations, up to 10% of households may own Crypto Assets.
“The majority of Crypto Assets owners reported holding less than €5,000 in crypto-assets, with a minor plurality of lower holdings (below €1,000) in this category,” they wrote. “On the opposite end of the scale, almost 6% of crypto-asset owners confirmed holding more than €30,000 in Crypto Assets.”
“When looking at the respondents’ income quintiles, the trend is basically U-shaped: the greater a household’s income, the more likely it is to own crypto-assets, with lower-income families holding crypto more than middle-income households.”
According to the analysis, young adult males and “well educated” respondents from the nations examined were more likely to invest in Crypto Assets. It also discovered that respondents’ financial literacy levels were either at the top or at the bottom, similar to the “U-shape” identified in their income inequalities.
The ECB, on the other hand, states:
Crypto Assets and The Economic Value
“Crypto Assets lack intrinsic economic value or reference assets, and their frequent usage as a speculative tool, significant volatility, and energy consumption, and use in financing illegal activities make them highly dangerous instruments.” This raises worries about money laundering, market integrity, and consumer protection, as well as financial stability.”
The government agency emphasized that Crypto Assets “are not suited for most retail investors,” either as an investment or a store of value, and warned that they risk losing a significant amount of money.
The ECB also cited all of the usually stated concerns associated with cryptocurrency, such as “misleading information, a lack of rights and protections such as complaints procedures or recourse mechanisms, and product complexity with leverage often inherent.”
Disclaimer: These are the author’s own opinions and should not be construed as investment advice. Readers are encouraged to conduct their own research.
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