FI Analysis No. 44: Most People Have Lost Money Trading Cryptocertificates

More than half of Swedes who traded in cryptocertificates over the past six years have lost money on their investments. This is despite the underlying market increasing by up to 500 percent during the studied period. This is shown in a new analysis by FI that examines Swedes' trading in cryptocertificates.

In Sweden, trading in cryptocertificates is a common way to invest in cryptoassets. Cryptocertificates are securities that include one or more underlying cryptoassets and thus track the price of these assets.

FI's analysis shows that around 200,000 people in Sweden have chosen to invest in cryptocertificates between January 2018 and March 2024. The majority of these invested relatively small amounts compared to, for example, the average amounts households save in mutual funds or stocks. The median investor traded cryptocertificates for approximately SEK 9,800.

Every second person has lost money investing in cryptocertificates

During the period, cryptoassets increased in value by up to 500 percent. Despite this, 53 percent of those who traded cryptocertificates and sold off their entire holdings during the period made a loss. This shows how difficult it can be to choose the right time to invest, especially in assets where the price fluctuates so sharply.

"The sharp price movements in cryptoassets do not only go upwards, but also downwards. We see that the interest in investing in cryptoassets tends to be at its highest when prices have already begun to rise sharply. Many investors simply enter the market at very high levels, which illustrates the difficulty of valuing these assets," says Mathias Lien Oskarsson, an analyst at FI.

Primarily, it is younger people who have traded cryptocertificates, and eight out of ten were men.

Cryptoassets are difficult to value

A contributing factor to the complexity in predicting how price movements in cryptoassets will develop is that these assets are particularly difficult to value. One explanation for this is that cryptoassets, unlike stocks for example, lack intrinsic value in the form of cash flows or physical assets. This makes it particularly difficult for an investor to determine whether cryptoassets are under- or overvalued. Instead, there is a risk that an investor focuses heavily on historical developments, which can explain why interest in them increases when their price has risen sharply and vice versa.

"Our analysis shows that the majority of those who invested bought in at high price levels. We also see that those who have had positive returns trading cryptocertificates on one occasion rarely succeed in repeating it if they trade again. This indicates that the positive outcomes may be more attributable to luck than skill," says Mathias Lien Oskarsson.

One factor that negatively affects returns is that cryptocertificates typically have high fees. According to our calculations, Swedes have paid approximately SEK 320 million in fees to invest in cryptocertificates.

Declining interest in investing in cryptocertificates

Despite prices of cryptoassets reaching new highs at the end of 2023 and beginning of 2024, the number of transactions in relation to price developments has decreased.

"Despite the high interest in investing in cryptocertificates, we see a trend indicating that it has begun to cool off recently. Over the past two years, the inflow of new first-time buyers has decreased, and the turnover in trading has also dropped. Additionally, 60 percent of all those who traded cryptocertificates have sold off their entire holdings and not reinvested in cryptocertificates," says Mathias Lien Oskarsson.

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