Young people and the attraction to cryptocurrencies
Elisabet Ruiz Dotras does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.
The bitcoin began to operate timidly in 2009 as an alternative currency in the middle of the banking crisis that was experienced then. A decade later, it has become not only an investment option, where large investors also want to get a share of their profits, but also a financial game for teenagers.
And it is that bitcoin and other cryptocurrencies (in slang, cryptos ), despite being a real investment alternative, seem like a gambling game or virtual Monopoly for young people today.
According to a study carried out in the eurozone by fintech 2gether in 2019, 56% of cryptocurrency users are between 26 and 45 years old and have a high educational level (although not necessarily in financial matters). 25% of them are millennial and 31% belong to the Z generation . In addition, 77% of users are men, showing, once again, the gender gap in financial and investment matters.
The CriptOS not have much sense if they were only an investment option for speculators. What gives them value is the fact that they are accepted as a means of payment.
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Although they are still in a very primary phase, the same study reveals that 37% of payments through its platform are made with cryptocurrencies, while the remaining 63% are still made in euros. It also points out that the average monthly spending on crypto is valued at 112.56 euros, highlighting that the majority goes to the restaurant and hospitality sector (32.71%) and the food sector (19.13%).
For digital natives, better ‘crypto’ than gold
Financial education indices are low worldwide and Spain is not spared from it: in the last PISA study (2019) this country obtained values below the average. If to this is added that experts insist that you must know what to invest in before making an investment, that is, that training in financial matters is essential, why are young people so attracted to cryptocurrencies?
Born between the eighties of the twentieth century and the first decade of the twenty-first century, millennials and Generation Z are described as highly digital, hyper-connected, with strong social values and addicted to immediate consumption: new technologies have taught them to have access to practically everything they want in record time. Thus, it is not surprising that they are attracted to digital currencies, which were also created as an alternative to the traditional financial system and to respond to current economic problems, an aspect that is in tune with their social values.
In fact, a study carried out in 17 countries ( The Tokenist, 2021 ) indicates that millennials have more confidence in cryptocurrencies than in the stock market, in real estate or in gold. And it is that being digital natives allows them to understand it and understand everything in that format.
The crypts can only buy, sell, store or exchange in digital format and, despite its intangibility, they are a real asset in the investment world. Plus, they can be traded 24 hours a day, 7 days a week, 365 days a year, which is a perfect fit for the millennial lifestyle.
The attraction to cryptocurrencies: a risky game
The value of digital currencies and their movements are easy to identify. However, investing in bitcoins or any other cryptocurrency is not as simple as looking exclusively at its value.
As in any other investment, you must be aware of the associated risks, an aspect that most young people who buy crypto are not aware of, given the limited financial knowledge of society as a whole.
Cryptocurrencies are in no way fiat money, controlled by a state or nation. They are a digital medium of exchange and are not endorsed by any institution, public or private, or any individual. Despite their dizzying diffusion and frothy reception, the vast majority have very limited knowledge about them. Often times, you don’t even understand the basics, much less how it works.
However, if we consider how difficult it is for today’s young people to earn money, it is understood that they are attracted to cryptocurrencies. A very volatile investment that can generate large profits, but also large losses, in a short period of time but, yes, assuming a high investment risk.
Other alternatives with lower risk (fixed income, the stock market, for example), either do not generate high returns or are very complex or require too high a starting capital for millennials.
Cryptocurrencies: easy trading and high risk
Investing in cryptocurrencies is as easy as signing up for one of the many management platforms out there, depositing funds, and purchasing them. Undoubtedly, something much simpler and less expensive in time and money (and often without requiring prior documentation) than opening a securities account at a financial institution. All these factors lead young people to use their savings to buy cryptocurrencies, hoping for quick and easy profits.
Crypto management platforms are advertised as a way to get money without being an expert. However, we should not lose sight of the risks involved in such investment, either by digital currency volatility, the risk of the platform or safety risk of chain blocks ( blockchain ).
Given its high volatility , experts recommend having a maximum of 5% of the total investment in cryptocurrency assets. However, probably millennials, without much financial knowledge, bet most of their savings on a game where they can win a lot but can also lose everything.
A key factor: the blockchain
The blockchain , the base technology of digital currencies, has been a key factor in its success (due to the security it generates), and has played an interesting role in turning crypto into something trendy among young people.