Hello readers of Publish0x.
This post is going to be short but sweet, but I hope those of you who read this pick up on something important that I just learned through an exchange with an old friend of mine.
This old friend of mine works for a fairly large US financial institution. He sent me a research report that is publicly available, but being circulated as research material for the financial advisors of said institution.
The report is about Bitcoin and other crypto-assets as a new asset class. The important part, is that as of 2 weeks ago, financial advisors like him have the regulatory authority to advise on and deploy investments into baskets of crypto-assets on behalf of accredited investors. This basically opens up a whole new market of (likely) older investors into the crypto markets. A large chunk of the population who has probably had crypo-hesitancy due to the complexity and perceived risks involved with this investment class.
What is an "Accredited Investor"?
Under current the United States regulatory framework, an accredited investor is a person or entity with at least $1 million net worth (not including their personal residence), or with at least $200,000 yearly income for the past two years. There are quite a few other rules, but this is the basic gist. We are talking about a threshold that is quite high for many ordinary people, but quite low when compared to the mega wealthy.
First, just for those of you who are unfamiliar with the term net worth, it represents all of a person's or entity's ASSETS minus all of a person's or entity's DEBT.
NET WORTH = ALL ASSETS - ALL DEBT
To put this into context, let's look at the United States population and run some numbers. According to the 2020 US census, the Median Net Worth for Americans was around $104,000. So exactly 50% of all American households have less than $104,000 and exactly 50% of all American households have more than $104,000. This doesn't meet our accredited investor standard yet. We need to break this down into quintiles to get to the potentially future activated accredited investors into the crypto markets.
You can see a massive difference between the bottom and top 20% in America.
Okay, so basically the potentially activated households are inside the 4th quintile and 5th quintile. The 4th quintile, with a median net worth of $188,300 is close to that $200,000 accredited investor requirement. For simplicity's sake, let's make the suggestion that 50% of the 4th quintile, and 100% of the 5th quintile are accredited investors. That would be 30% of all households. If there's about 150 million households in the US, then that means there's about 45,000,000 potential accredited investors in the US. That number looks a bit too high.
Looking to other sources, I found a more precise measurement with 2019 data that suggests there were 128,430 total households, and that there are 13,665,475 accredited investors in 2019. Let's use that figure for a more conservative approach to this analysis.
Here we can see 2019 total accredited investors were 13,665,475.
This was an increase of around 3 million since 2013.
Okay so we have established 13 million accredited investors as a safe figure. That means that we are talking about some appreciable fraction of 13 million households that are now being sold on the idea of crypto-assets as part of their portfolio. I personally think this will be huge for the continual mainstream adoption of crypto-assets, since we are talking about adding crypto-assets to people's retirement funds, which basically the investment occurs and then just stays there for many years, even decades.
Thanks for reading!