Rising inflation, the appeal of cryptocurrencies, and the power of “finfluencers” from social media are just a few of the elements that are separating Gen Z investors from earlier generations in the investment landscape.
The FINRA Foundation and CFA Institute have released a new analysis that highlights the unexpected investing behaviors of Generation Z in the US. Even though they are still young, more than half—56%, to be more precise—of Gen Zers make investments, with cryptocurrencies taking the lead with 55%. Let’s examine their inclination toward cryptocurrency and individual equities, how much less they rely on mutual funds than previous generations did, and how much interest they are showing in NFTs (non-fungible tokens). We’ll try to present you with the way Gen Z investors are adopting cryptocurrencies, using social media to educate themselves about finance, and demonstrating an eagerness to take chances. We’ll help you learn about the obstacles they encounter and contrast national trends in Gen Z investing.
FINRA-CFA Report Opened Our Eyes
The survey in question delves into the attitudes and practices surrounding investing among Americans between the ages of 18 and 25, who fall into the generation that comes after Millennials but before Generation Alpha. Comparing Gen Z with millennials and Gen X, two groups are examined: those with accounts for investments and those without. It also compares Gen Z investors in China, the UK, and Canada to their American counterparts and provides profiles of these investors.
A sizable portion of Gen Z people in the US are investors, even though they are still relatively young. The generation that’s popularly counted to begin its existence between the mid-to-late 1990s and early 2010s is represented by about 56% of those who report having a minimum of some investments, with cryptocurrencies being their top pick. Additionally, they have a preference for individual companies and are not as inclined to employ mutual funds. In addition, millennial and Gen Z investors exhibit a greater inclination to invest in NFTs and cryptocurrencies than do Gen Xers. In addition, sports pose another major investment for millennials, whether they are less significant sporting tournaments or huge ones like the FIFA World Cup or the ICC Cricket World Cup. They select their favorite cryptocurrency sports betting sites, such as the best Ripple bookmakers in 2024, out of those properly checked here for various criteria, including transaction safety, to enjoy and blow off steam from their regular jobs and stress—after all, this generation is fully employed since the beginning of the century.
Gen Z traders in the US rely on a range of sites to educate themselves about investing. Their financial education is greatly influenced by online searches, social media sites like YouTube, and family and parental guidance. The most popular online resource is YouTube (60%) and is followed by Internet searches, Instagram, TikTok, Twitter (before it became X), Reddit, and Facebook.
According to 46% of Gen Z investors in the US, they are open to taking significant or above-average financial risks, demonstrating their willingness to accept financial risks. Furthermore, half of them acknowledge that they have made investing decisions based on FOMO (fear of missing out).
What Poses an Obstacle for Gen Z to Invest?
Let’s examine the obstacles that American Gen Zers face while trying to make investments. The main excuses given for staying out of the financial world include a lack of money, having little income or surviving paycheck to paycheck, and ignorance of investing.
Gen Zers are making active investments across a number of nations, including China, the UK, and Canada. Of the nations in the research, Canada has the largest proportion of Gen Z investors (74%), who claim to possess a minimum of one investment. In contrast, the ownership rate in the US is 56%, that of the UK is 49%, and that of China is 57%.
In general, Gen Z members are diverse and technologically adept. Knowing their investing choices and arming them with educational resources become essential as they become more and more involved in the financial markets. Gen Z investors differ from earlier generations in that they are influenced by factors that are changing investment methods, products, and platforms, such as growing inflation, the growing appeal of digital currencies, and the power of social media “finfluencers” (financial influencers).
A Practical Guide to Crypto from Generation Z and What You Need to Know for the Upcoming Wave
The mid-2021 crypto bull market served as a major catalyst for Gen Z individuals’ initial foray into the realm of cryptocurrency. The majority of them boarded the cryptocurrency bandwagon at that point. This is where the diversity of Gen Z members is evident: they have a great deal of knowledge on subjects like psychology, technological advances, smart contracts, investing, and cryptography. Whoever acquired all of this information would actually claim that the cryptocurrency market is extremely volatile, unpredictable, and cruel. Adoption, contributions, speculation, and, of course, frauds all occur at a breakneck pace.
Understanding and knowledge are important in the realm of technology and investing. Having stated that, we want to share with you the knowledge we have gained from Gen Z, the generation that was raised in the age of technology. Before you jump in, take note of the following information. This is the future of cryptocurrency…
Investing in Cryptocurrency
Since Gen Z is the inaugural generation of jobbers, money is important to them, which is why the topic of investments is important to them. Twentysomethings live in a capitalist society. It’s the investment world. This universe is a game of money.
When considering cryptocurrency as a form of investment, the market is quite erratic. It can decline by 50-90% with ease. It moves at an average rate of 5-10%+. The majority of Generation Z is unaware of the volatility since they lack a classical understanding of investments. The regular market would be experiencing a financial crisis if it were to vary like the cryptocurrency market.
Here are several fundamentals you should be aware of before entering the speculative cryptocurrency market.
- Setting a budget
- Management of portfolios: Diversification
- Risk management: maximize profits, minimize losses
- Investing psychology: fear and greed
- Fundamental technical analysis (Tradingview and Graph)
- Fundamentally simple analysis (Tokenomics)
- Fundamental understanding of the traditional market (funds, stocks, bonds, ETFs, etc.)
It’s advisable that you are aware of these concerns prior to entering the market. This is particularly valid for Gen Z and younger generations who are unfamiliar with the cryptocurrency space. There are shared skills and expertise between the two marketplaces. For instance, having risk management abilities helps you endure longer in the cryptocurrency market.
You may disperse the risk and gain by diversifying. Don’t forget to diversify things. Both your asset allocation and portfolio can be diversified. Additionally, you can spread your money throughout the field. In other words, DON’T PUT IT ALL IN!
Setting a goal is another crucial step. Regardless of whether you entered the room to learn or to speculate, you must clearly define who you are and know exactly what you are doing; to prevent you from becoming sidetracked by the market.
Don’t Put Too Much Trust in the Influencer
The worship of personality must be abandoned. People aren’t trustworthy. Some investors have fallen for their tricks and become “exit liquidity”, which is just another way of saying that influencers, or “finluencers” as they are called in this context, leverage you and benefit from you.
Additionally, some “finluencers” will develop a “model” in an attempt to forecast the market. The S2F (Stock-To-Flow) concept and the Rainbow chart are the most obvious case studies. The majority of investors bought at the peak and HOLD (hold on for dear life, which is a misspelled abbreviation of “hold” for buying and preserving cryptocurrencies) til it crashed since both failed. All of this demonstrates your inability to forecast the market. You’re only able to mitigate the danger.
Boom Cycle, Bust Cycle, and Surfing the Cycle
We can state with confidence that the cryptocurrency market meltdown was quite frightening for novices. Whoever was witness to a 50% decline following the November 2021 market crisis can say it was crazy. Imagine that in a single day, 50% of the valuation is gone. A “boom” inevitably precedes a “bust”. Additionally, you may recall the period when alternative and meme coins surged in value (alternative coins typically saw increases of 100x or 1000x during the peak of the cryptocurrency market).
“Booms” and “busts” resemble a market “cycle”. This means that whether it’s FTX, 3AC, or Luna, if you know how to ride the market wave, you can make money or, more significantly, you can survive the fall. Survival should always take precedence over financial gain. There’s a good probability you’ll give up or learn from your failure.
We’ve discovered by talking to Gen Z investors that getting started and practicing are the greatest ways to learn. Real-world experience is essential. It’s comparable to learning how to ride a bike and then falling off. It’s necessary to suffer harm and decline in the cryptocurrency market. You’re able to study, invest in, and comprehend the psychology of investing from it.
Safety and Con Artists: How Can You Identify Them and Prevent Their Actions?
Since fear and greed are inherent in human nature, we don’t think the hoax will ever go away from human civilization, even after all these years; not within the cryptocurrency realm, for sure. There’s a variety of con artists, whether it’s phishing, fraud, Ponzi schemes, etc.
The fact that Gen Z has grown up with technology is a plus. They are less likely to become victims of fraud. On the other hand, some con games have advanced significantly. In NFT spaces, there are clear examples.
We’ll reveal to you the precise method used in these frauds. Scammers will first act as though they are interested in your job in an effort to make you feel valued. They’ll then ask you to contribute to or invest in your artistic endeavors. At that point, they’ll force you to “sign” a document or “install” a program. This is the beginning of a smart contract or a malicious application.
For instance, October 2022 smashed all previous records for cryptocurrency exploits and the quantity of digital currency taken, living up to its new nickname of “Hacktober”. The blockchain security company PeckShield released some alarming monthly numbers on October 31. As of October 31, 2022, there were $2.98 billion in digital assets that had been stolen, almost twice as much as there had been in all of 2021—that is, $1.55 billion.
Not to mention, get involved in the cryptocurrency community. You’ll receive brief updates on the state of the market, tokenomics, news, and proposal scenarios.
How Can One Prevent Scams?
Gen Zers’ advice is to simply read and don’t rush. You should be wary if someone or a platform is pressuring you to complete a transaction quickly. Transactions in the cryptocurrency realm can’t be undone. It’s a financial system without banks, as you know. Apart from certain big scenarios that depend upon centralized blockchains, no banks would assist you as they would in traditional finance.
“Just read” indicates that you should thoroughly read the document you are going to sign. Because this is the area where “code is law”—that is, the contract does precisely what it says—you should be mindful of what the contract expects of you. The majority of people are ignorant of how to inspect or interpret a smart contract, which is the issue. Using an extension that clarifies and explains what the smart contract will do when you sign it could be the answer to this problem. Fire is among the most widely used extensions.
Furthermore, bookmarking will help you in this dangerous area. Go to the project’s official X account if you wish to utilize it. You ought to constantly bookmark them as soon as you have given them a try and determined that they are reliable.
Thus, it’s important to have a fundamental understanding of smart contracts and blockchain technology. This includes being familiar with custodial and hardware wallets as well as the workings of cryptography (passphrase, public key, or private key). Basically, you’ll benefit from having even a basic understanding of cybersecurity. For those who are not tech-savvy, just remember to be curious, consider your options carefully, and, above all, avoid becoming overly greedy.
The Technology of Cryptocurrency
They come for the tech, but they stay for the money. For the most part, that’s what tech-savvy Gen Zers do. The field of cryptocurrency has a tonne of information to learn. Gaining an understanding of the principles of Bitcoin would take several months. Not only is Bitcoin the original cryptocurrency, but it also incorporates a great deal of technological advances and innovation. It encompasses a number of topics, including politics, economics, the history of money, technology, encryption, and proof-of-works (or more!). The majority of people are completely enamored with it. These people are referred to as “Bitcoin maximalists”, or simply “Bitcoiners”. The same is true for other currencies, such as Ethereum.
Web3 is the area of cryptocurrency technology that Gen Zers wish to concentrate on. Why?
This is due to the fact that they can start using smart contracts and decentralized applications (dApps) with ease using the EVM (Ethereum Virtual Machine) and the programming language Solidity. Regarding decentralization, there’s a dispute between Bitcoin and other cryptocurrencies. Here, the Gen Z population’s interest in investing limits the discussion to the technology known as “coding”.
You’ll eventually be capable of reading smart contracts if you learn to code, which will be advantageous. You can also earn and learn by participating in some of the initiatives. It won’t be simple though if you don’t know how to code. It’s also a terrific opportunity to study, invest, and contribute because crypto technology always advances during bear markets.
Is This the Future?
Even though it remains in the adoption process, it might be the future. This is a result of major players beginning to enter this technological space and use buzzwords. Certain innovations and technologies are true and have practical applications. Some are only trying to sell you something and steal your money. This is heavily dependent on the course of events in the future.
Is innovation in store for the future? Will there be conjecture in the future? Will IT businesses and startups rule the future?
Crypto, in our view and also in the view of Gen Zers, is the way of the future. Still, only those that are real, like Ethereum and Bitcoin, will endure.
Both adoption and public participation are increasing. Some predict that it will probably resemble the dawn of the era of the Internet. In this area, a variety of technologies will evolve and become relevant. Artificial intelligence, zero-knowledge proof, and future innovations are all part of the technology.
Source: World Bank, Crypto.com
Behind the scenes, developers and the development process are thriving. As we’ve previously discussed, developers enjoy creating in bear markets. Real contributions are the only thing coming from institutional or venture capital investors. Through Lighting Network and Taro, Bitcoin is making a significant influence. Ethereum, on the other hand, has made the switch to PoS (proof-of-stake; The Merge) and has a lengthy roadmap of future developments. Even though large tech corporations are firing them, the Improvement Proposals for other endeavors are steadily increasing.
Business Growth and Startups
In a bear market, the cryptocurrency industry’s commercial side is likewise struggling. On the other hand, many initiatives and startups saw significant progress when the 2021 bull market hit. There are very few new businesses and initiatives being developed. These cryptocurrency ventures number in the hundreds. Realistically speaking, though, most of them are dying or near death. Why?
Because some of them, like Helium, are leveraging buzzwords to make quick money. Some, like FTX, are scams. As a result, it’s truly fascinating when a project succeeds. It indicates that they are able to make money and that their projects are somewhat successful in meeting needs and resolving issues related to traditional finance.
Big Player
The market and the uptake of cryptocurrencies are greatly influenced by venture capital and institutional investors. Money (not Bitcoin) is the driving force behind all projects. What could be made of them? The lesson is the answer.
We may take advantage of and learn from Gen Zers’ errors. A brief illustration would be that some investors copy-trade these VCs after them. Because they are aware of information that Gen Zers were unaware of, we dubbed it “smart money”. They have an entirety of staff devoted to obtaining and examining additional data. These major players are riding the cycle and obeying the pattern, as evidenced by the graph below, by cutting back on the investments they made during the market crash (some even declared bankruptcy). Macroeconomic variables contributing to this massive decline include the potential for an economic downturn and the technology sector bubble.
