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eToro: crypto as a solution to inflation

A new research report from the world’s leading social trading platform, eToro, reveals that retail investors believe that rising inflation is currently the biggest threat to their portfolios.

For eToro’s Retail Investor Beat initiative, 6,000 savers in 12 countries were surveyed, and it was found that the rising cost of goods and services has led to several changes in managed portfolios, with certain assets being bought and sold.

For example, 40% of respondents noted that precious metals, such as gold, are the best assets to buy over the next 12 months.

Overall, 25% said they are investing in cryptocurrencies and digital assets. On the other hand, taking only the UK into consideration, we observe that the percentage is 17%.

The survey results show that investors aged 18-34 were the most supportive of cryptocurrencies and blockchain, with 46% saying they hold these types of products in their financial portfolios.

Inflation materialized this year when government bond yields rose to pre-pandemic levels. A market-based indicator, the breakeven rate calculated between yields on five-year Treasuries and inflation-indexed bonds, jumped to its highest value in almost 13 years.

Globally, 38% of retail investors see inflation as a real threat, but looking at individual countries, investors in Germany (48%), Poland (55%) and the US (51%) were more concerned than their British counterparts (38%).

In addition, two in five savers believe global markets are at risk of a financial bubble as share prices reach new highs that are not justified by trends in market fundamentals. 

Only 15% of the 6,000 investors surveyed believe markets are fair or undervalued, while 45% were silent on the issue, signalling uncertainty about future market performance.

However, despite the divergent views, eToro’s data shows that only one in four respondents, i.e. 27%, believe a significant fall in share prices is likely in the coming months. In contrast, 26% of savers and small investors in Italy are worried about an imminent crash.

Ben Laidler, Global Markets Strategist at eToro, commented on the results and interview responses:

“The data shows retail investors have balanced portfolios; they’re 60:40. They’re holding cash and focusing on fundamentals like diversification to spread their risk – which is the golden rule when markets are unpredictable, as they have been over the last few months.”

According to Laidler, it is worth remembering that while valuations are high, equities are currently cheap compared to bonds, and the fact that only one in four investors believe there will be a financial meltdown before the end of the year suggests that many savers are willing to continue paying current valuations at the moment.

The survey by eToro, the multi-asset investment platform, therefore found a pronounced increase in retail demand for precious metals, renewable energy, crypto assets and real estate to counter the threat of inflation. In conclusion, the information gathered shows us that the majority of respondents (53%) think their investments will improve over the next 12 months.

Riccardo Mangiapane
Riccardo Mangiapane
Graduated in Management and Finance at LUMSA University in Rome. Passionate about fintech and crypto, he follows with interest the events in the financial markets, cooperating as part of a team in the analysis of several case studies during his academic career.