Digital cryptocurrencies, Bitcoin, Ripple, Ethernum, Dash, Monero, and Litecoin.
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Most millennial millionaires have most of their wealth in crypto, and they plan to add more in 2022 despite recent price drops, according to CNBC's Millionaire Survey.
83% of millennial millionaires own cryptocurrencies, according to the survey, which surveys investors with investable assets of $ 1 million or more (not including primary residences). More than half (53%) have at least 50% of their wealth in crypto and almost a third have at least three-quarters of their wealth in bitcoin, ether and other types of cryptocurrencies, according to the survey.
The cryptocurrency holdings of millennial millionaires contrast with previous generations of millionaires. Only 4% of baby boomers own any cryptocurrency, while more than three-quarters of Gen X investors don't own any crypto, according to the survey.
A generational divide
The results suggest that cryptocurrencies are creating a vast generational schism in investing and wealth creation. While previous generations of millionaires remain largely skeptical of cryptocurrencies and its future, cryptocurrencies have become the primary source of wealth creation and asset growth for many younger investors who entered early and have seen fast returns.
"This is a huge difference between different generations of wealth," said George Walper, president of the Spectrem Group, which conducts the poll with CNBC.
Despite recent price drops in bitcoins and other cryptocurrencies, millennial millionaires have no plans to reduce their investment in cryptocurrencies. About half (48%) plan to increase their stocks over the next 12 months, while another 39% plan to maintain their current crypto levels. Only 6% of millennial millionaires plan to reduce their crypto investments over the next year.
A dilemma for wealth managers
With so many millennials and Gen Z investors becoming crypto millionaires, it will likely remain critical to their investments for years to come. That has created a new dilemma for wealth management companies. Most of the existing business of private banks, wealth management firms and advisers comes from wealthier older clients who do not want crypto and its associated risks in their portfolio or products. However, its future depends on next-generation clients, who demand crypto advice and products.
"I'm not sure the wealth management industry has recognized that they really need to think of them as completely different generations," Walper said. "Most companies were hoping to ignore it. But millennial millionaires are not going to 'leave behind' cryptocurrencies."
Walper said that many wealth management firms are reluctant to add crypto directly to their investment platforms due to legal and performance risks. However, with a growing number of crypto financial products available, including crypto-based ETFs, many more companies can now start offering crypto products to younger investors.
"That allows them to offer exposure to bitcoins and other cryptocurrencies, without being a direct holder," he said.
Walper said there are two broad categories of millennial crypto investors: those who made millions from cryptocurrencies, and those who increased their existing wealth (primarily received from inheritances or startups) by investing in crypto. According to a Spectrem survey, 45% of millennial millionaires credit inheritance as a factor in their wealth. Among millennials worth $ 5 million or more, inheritance was the main factor (at 75%) in their wealth.
At the same time, millennials who entered crypto years ago, with small bets on their income, have become self-made millionaires thanks to returns from cryptocurrencies that have vastly outperformed stocks and other asset classes. The question now is whether millennials remain in the cryptocurrency market, and in the ranks of millionaires, if bitcoin and other tokens have a prolonged decline.
"They seem to be comfortable with volatility," he said.
