Rich millennials gravitate toward crypto – and social media plays a significant role in it

The popularity of cryptocurrencies has surged over the past years, with a growing number of people jumping on the bandwagon and adding crypto to their investment portfolios. The prevalence of exchange platforms has also made it easier for anyone interested in crypto to break into the market and kick off their investment journey. People can easily buy Bitcoin with credit card right from their phones and start trading right away. So, it’s no surprise that the crypto community keeps expanding as new traders and investors enter the market.

However, not all investors are equally interested in pouring money into crypto. A recent study by Bank of America shows that wealthy millennials are crypto’s biggest supporters and account for a large part of the investments in the area. The 2022 Private Bank Study of Wealthy Americans, which was conducted between the months of May and June 2022, reveals that 75% of high-net-worth individuals in the 21 to 42 age group are moving away from traditional investments, as they no longer consider them viable for above-average returns.

Thus, digital currencies become an increasingly appealing investment tool for millennials looking to increase their wealth in the long run. A similar conclusion can be drawn from a Motley Fool survey which reveals that 60% of millennial investors own both crypto and stocks, with cryptocurrencies taking the lead as the more popular investment.

The crypto winter isn’t scaring away young investors

If you’ve been keeping tabs on the cryptocurrency industry, you know that we’re in the midst of the coldest crypto winter to date. Experts believe this period of decline started sometime between late 2021 and the middle of 2022. This has caused many digital currencies to experience a sharp decline in prices, including market leaders like Bitcoin and Ethereum. According to the CNBC All-America Economic Survey, the crypto market lost over $2 trillion in 2022, with many popular cryptocurrencies plummeting, Luna and Terra crashing and FTX filing for bankruptcy.

Investing in cryptocurrencies has always been a tricky business. Although no investment is free of risks and all markets have a certain degree of volatility, the frequency and magnitude of price movements are much more intense for digital currencies than it is for any other traditional asset. That’s partly because the crypto industry is still in its infancy, having been around for little over a decade. By comparison, people have been investing in stocks for centuries, and many of the publicly traded companies have a decades-old history behind them.

You’d think that the high level of volatility and unpredictability would serve as a deterrent and push investors away, but that’s not necessarily the case. Wealthy millennials don’t seem to be impressed by the risk of extreme price fluctuations and all the grim investment stories stemming from it. Instead, they tend to look on the bright side and are much more interested in hearing success stories.

This attitude can be explained by the fact that high-net-wort individuals dispose of enough funds to weather the storms in the market. Young investors are also more likely to take on dangerous investments because they have a higher risk appetite, and have greater experience (and a better understanding) of handling digital assets than their older peers. Therefore, they don’t get easily scared by the prospect of losing their investments and they continue to march on waiting for the next bull run to begin.

An opportunity to build wealth

The 2022 Private Bank Study of Wealthy Americans also gives us a glimpse into people’s perceptions of different types of investments. 29% of rich young investors believe that cryptocurrencies provide the best chances of increasing their wealth, closely followed by real estate investments. However, older investors see things differently – 41% of them believe that traditional investments such as stocks, bonds, mutual funds, index funds, or equity shares present a much better opportunity as a path to building wealth.

For millennials, crypto volatility is an advantage, not a drawback, as it creates the potential for high returns. Obviously, it can also magnify losses, but that’s a risk they’re more than willing to take. That’s why almost three times as many young investors have faith in crypto’s potential as a long-term investment option compared to investors aged 43 and above.

Speaking of risks, experts generally advise people to diversify their portfolios by including a variety of investments with different expected risks and returns. They also recommend keeping crypto investments below 5% of the overall portfolio. It appears that the young investors who participated in the study didn’t care much for these recommendations as they allocated 15% of their portfolios to crypto on average. At the other end of the spectrum, older investors limited their crypto assets to 2%.

Social media serves as a financial advisor

The cryptocurrency industry is an incredibly fast-paced and ever-changing environment, so investors need to keep their eyes and ears wide open in order to keep up with the latest developments in the market and make smart investment decisions. That’s why investors rely on a variety of sources to provide them with the information they need.

For wealthy millennials, these sources are represented by social media platforms like TikTok, Instagram, or Reddit. According to the study, the vast majority of young investors turn to these networks for financial advice and guidance. It’s also revealed that 60% of millennials consider they have a good understanding of digital currencies, compared to only 12% of older investors. The latter resort to in-depth online research or choose to consult with financial experts when it comes to making an investment decision.

It's impossible to predict when the crypto winter will come to an end or how the market will evolve in the years to come. But it seems that wealthy young investors are less concerned by the industry’s unpredictability and continue to put their faith and money into crypto, at least for the time being.

 

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