How retail investors are making digital assets part of their lives

An EY-Parthenon survey of more than 1,000 retail investors shows that 64% already invest in digital assets or related products^*.

In brief

• Retail investors consider digital assets as a key component of their broader wealth strategy and plan to invest more in the next two to three years.
• Digital assets investor use cases and product needs are expanding, creating opportunities for both TradFi and crypto-native firms.
• Areas of opportunity include providing wealth management, access to funds, wallet and trading capabilities, supporting payments, and more.

Cryptocurrencies have captured both headlines and the imaginations of investors for nearly a decade. Now, a surge in retail investor demand is creating new opportunities for wealth managers and banks, merchants, and crypto native firms alike. An EY-Parthenon survey of more than 1,000 retail investors shows that 64% already invest in digital assets or related products, while another 69% plan to increase investment in digital assets over the next two to three years. But what are these investors most interested in, and what are their allocation plans? Understanding where demand is most likely to grow — from wealth services to payments to registered vehicles — will arm financial institutions and FinTechs to capitalize on rising retail investor interest.

While many thought that digital assets were just a novelty, some saw a new asset to invest in and have leveraged the technology to improve speeds, reduce costs, and redistribute value across our financial infrastructure. Underpinning this movement has been the retail investor. Whether it was to create wealth or to promote the democratization of money, cryptocurrency has been supported by a loyal following of individual investors holding bitcoin (BTC), Ethereum (ETH), and alt coins directly. Retail investors expect to increase allocations, seek new services from traditional financial firms, embrace tokenization and experiment with new use cases to take digital assets beyond the mere store of value. Financial firms and merchants will be successful in capturing these new customers through expansion of services retail investors demand around payment systems, wealth management, retirement planning, trading, custody, and lending products connected to digital assets.

EY-Parthenon’s third annual global retail survey, including a mix of accredited and non-accredited investors* and conducted in March 2024 just after the approval of a series BTC Exchange Traded Products (ETPs), aimed to better understand the perspectives, sentiment and allocations of these investors.

Retail investors are believers in the digital assets’ opportunity

Long-term belief in the staying power of digital assets continues to increase for the retail investor. On average, 72% of those who have invested in digital assets consider digital assets a key component of their wealth building strategy, with 83% of accredited investors who have invested in digital assets holding this sentiment. While investors have been comfortable with direct investments in digital assets through crypto exchanges and FinTechs (43% percent of investors plan on investing in spot crypto this year), around 40% plan to seek out mutual funds, ETP, funds, and trusts that invest in digital assets. In general, there is a desire to gain more exposure through traditional financial institutions. For instance, three-quarters of investors plan on seeking professional financial advice regarding crypto, and there is a wider preference for engaging with Traditional Finance (TradFi) firms to include digital assets as part of an overall portfolio planning strategy.

Investors plan to increase their investments in digital assets funds over the next 2–3 years

Digital assets are becoming a greater piece of a new financial reality

While the narrative of “bitcoin as digital gold” remains, investors are beginning to engage in a broader range of use cases and acknowledge the blurred line between crypto as an investment and a monetary instrument. In fact, between 2022 and 2024, investors noted an increase in “active” (beyond buy and hold) uses of digital assets as use cases expanded. Not only have investors seen a greater interest in leveraging digital assets for payments, but they also report a 16% increase in usage for staking, an 11% overall increase in using digital assets to participate in DeFi platforms, and a 6% increase in payments.

Investors suggest increasing active usage of crypto, including 17% increase in DeFi¹, 16% in staking, and 6% increase in payments

Majority of retail investors want digital assets advisory services from their traditional financial advisors

Majority of retail investors want digital assets advisory services from their traditional financial advisors

While crypto natives and FinTechs have seen significant growth, investors continue to ask for broader participation and services from TradFi firms in supporting crypto. The survey results show somewhat of an unmet demand for TradFi firms to provide a wide range of digital assets services to their existing clients. This demand spans planning services across wealth and estate management, retirement, tax, and trust services. In fact, 85% of retail investors are interested in their wealth and estate planning advisors incorporating crypto into an overall strategy. For wealth and asset managers, this presents a potential opportunity to increase share of wallet among investors. For crypto native firms this is an opportunity to potentially launch net new advisory services to address these unmet needs.

Investors want access to new investment options and services

Investors are looking to expand not only what they buy, but how they buy, and how they can leverage new digital asset investments. This in turn opens new revenue streams and potential new services for both TradFi and crypto native firms. Capabilities such as breadth of coins held, borrowing against their assets, custody of Non-Fungible Tokens (NFTs) and staking top the wish list for retail investors. All of these capabilities have seen significant increases in importance for investors since 2022. The desire for greater breadth of coin offerings has increased from 68% to 79%, the desire for lending product from 32% to 52%, and interest in staking from 25% to 43%.

The desire for greater breadth of digital asset services has increased in importance for investors since 2022

Tokenization and its potential benefits to investor experience and portfolio allocations has also been an important topic. Again, accredited investors are leading the charge with a higher positive sentiment. Nearly two-thirds are interested in tokenized assets, vs. one-third of non-accredited, and 88% plan to invest in tokenized assets by 2027. Diversification is one of the primary motives for investors seeking tokenization. Retail investors have traditionally faced barriers for many alternative investments including hedge funds and real estate, with 49% of accredited investors noting they wish they had access/better access to alternatives. Tokenization can provide access to products such as alternative investments, hedge funds, real estate and commodities in a way that makes these investments more accessible (lower minimums) and more liquid in secondary marketplaces for the retail investor.

63% of accredited investors are interested in investing in tokenized assets vs. 33% of non-accredited investors; 88% plan to have invested by 2027

Digital assets are increasingly being used as payments, particularly by accredited investors

The original vision of bitcoin was anchored in a decentralized, peer-to-peer means of exchanging value, inclusive of a possible alternative to the current monetary system. However, as the ecosystem has developed, this vision has been overshadowed by the narratives of digital assets as a complementary store of value in the existing financial system and the underlying technology, blockchain, as a superior set of rails. Payments have become more appealing to retail investors, presenting the dilemma of spending, or holding an appreciating asset. Investment prospects aside, retail investors’ interest in digital assets for payments continues to grow for online payments and to pay family and friends, in part, due to features such as instantaneous settlement and the potential for lower fees. For accredited investors, who may have greater values held digitally, 69% have used digital assets (crypto and/or stablecoins) for payments one or more times in the past 12 months. In contrast, only 28% of non-accredited investors have used digital assets for payments a single time in the past 12 months. The most frequently used stablecoins for payments include PYUSD (47%) and USDC (38%). Non-accredited investors who have not used payments cite the sufficiency of current methods as a primary barrier to adoption. Recognizing the potential value of digital assets, 53% of retail investors surveyed would consider getting paid through payroll in digital assets.

Scott Mickey also contributed to the article.

Note: The survey was conducted before the US Securities and Exchange Commission (SEC) approved the sale of spot Ether ETPs in the US on May 23, 2024.

*Digital asset-related products include funds, trusts, derivatives, etc.