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GenZ and Crypto: A Disaster Case with a Happy-Go-Lucky Attitude?

Cryptocurrency Jun 12, 2021 06:00AM ET
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GenZ and Crypto: A Disaster Case with a Happy-Go-Lucky Attitude?

  • Bitcoin is the boomer coin, while Dogecoin is the hype coin.
  • Meme coins and ‘stonks’ behave similarly to penny stocks, in that they can offer high returns, but with a higher risk of losing money.
  • Gen Z’s intimacy with digital technologies and their ‘DIY’ attitude positions them to be comfortable obtaining financial information from platforms like TikTok and Twitter.
  • New investors are eyeing immediate financial gains, comparing Bitcoin to outmoded trading preferences.

Investment habits have diversified for Gen Zers and Millennials. Their inclination to use and embrace TikTok, Twitter and YouTube for financial advice, and apps like RobinHood for trading, has forever changed the value-trade dynamic. Memes and Millennial lingo have led to the emergence of investing in notorious meme coins and ‘stonks.’

Bitcoin, on the other hand, to young investors has a lower perceived value and priority, with many alluding to it as a “Boomer coin.” In the new trading meta, where FinTok alters the perception of what is or isn’t worth investing in, the behavior of young traders could disturb the cryptocurrency market.

Investment Fueled by Hype

NFTs, meme coins, and diamond hands have become staples of investment vocabulary in the first half of 2021. Global exchanges are catering to the demands of young traders, listing coins like DogeCoin and Shiba Inu, which are no more than a joke.

Driven by FOMO, young investors are constantly seeking new coins that promise high returns after missing out on Bitcoin. One such Dogecoin millionaire, Glauber Contessoto, hailed DOGE as the “Millennial coin.” Australia’s Finance Service Minister also emphasized that meme coins should be considered as an “asset class” and investing in such is a “personal responsibility.”

FinFluencing Is a Thing

FinTok and influencers have stimulated these new investment practices. A DoSomething Strategic survey discovered that over 45% of Gen Zers use social media for investing, however, one in three cryptocurrency investors have no understanding of what they are buying. People are largely investing in the hype of what they discover on social media, or whichever coins Jake Paul or other influencers are promoting at a given time.

Furthermore, buying into the hype has generated concerns about the trustworthiness of some coins. Crypto trader Lark Davis argues that the social media-driven token SafeMoon is similar to a Ponzi scheme, because “people love Ponzies” and the idea of winning big. Investors have further highlighted that investing in new, and even some established Altcoins, is risky.

The Price of Influence

Elon Musk has shown social influence plays a paramount role in how people invest. Still, investing in Millennial coins remains a speculative action, as the price is determined by supply and demand. Ava Labs’ president John Wu highlighted that “unprecedented access to trading applications” has displaced conventional trading wisdom among a generally younger audience.

Uniquely, using social influence to affect investments is similar to taking control of one’s financial results. Popular TikToker Josh Richards, the founder of Animal Capital, underlined that investing in atypical ways is “the modern form of rebellion.” Additionally, financial offerings cater to the demands of new users, as they require more personalized products, disconsidering the ‘one-size-fits-all’ system.

On the Flipside

  • Young investors are not only trading meme coins, but are also investing in cryptocurrencies with good fundamentals, such as Ethereum and Cardano
  • Gen Zers are the most likely to adopt new technologies due to their position as digital natives.
  • Regulatory action in the crypto investment sector will decrease the risks associated with lottery-style investing.

The Future Of Investing Is Dangerous

Social influence trading is a dangerous endeavor, regardless of how easy it is for Gen Z’s to gain experience. However genuine a piece of advice may be, as human beings, our perceptions of the truth are altered simply by how we perceive the person sharing the advice. Some information online will be wrong, as Jane Hume iterates, “this isn’t financial advice, but as has been the case since taxi drivers started giving stock tips, it is an inevitable part of a financial ecosystem.”

Google (NASDAQ:GOOGL) search volumes for “buy Dogecoin” have reached their maximum possible value, because meme coins resonate with the identity and culture of young investors. Rachel Siegel contends that Gen Zers do their own research and don’t simply invest blindly, based on what someone told them. However damaging the influence of social media might be for future investors, gathering investment information from those sources will remain embedded in user behavior going forward.

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GenZ and Crypto: A Disaster Case with a Happy-Go-Lucky Attitude?
 

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