Why is Bitcoin Such an Attractive Asset Class for Younger Investors?Laura
It’s no secret that bitcoin investors tend to be much younger than more traditional investors. A recent survey by Charles Schwab UK found that most crypto assets were traded by people under the age of 40 and half of Britain’s youth had traded these assets at some point. This trend may apply across the world, as is evident on social media.
There could be a number of reasons for this skew in demographics, but three overarching themes can help explain why this asset class is so widely adopted by younger investors.
60% of millennials rely on their close friends and social media for investment advice. This makes momentum trading on seemingly exciting assets more attractive. In other words, younger investors are more prone to invest in assets they hear about a lot due to the type and way in which they consume information. Seeing Bitcoin’s triple-digit returns in recent years play out on some influencer’s timeline is deeply impactful for this cohort.
The FCA found that the thrill and prestige of holding assets that were the subject of frequent memes and social chatter was a major driver of investment activity for younger traders.
Another reason younger investors are more likely to adopt Bitcoin is that the concept of a digital currency is easier to understand for a digital native. Millennials and Gen Z investors have spent their entire lives with digital tools and platforms. Online shopping, digital marketing and social gaming is a part of their lives, so the need for a digital currency seems intuitive to this group.
Lack of wealth building opportunities
Generational economic factors could be the key driver of Bitcoin adoption for younger investors. Investors over the age of 40 had an opportunity to build wealth via traditional assets. The S&P 500 has returned 3,000% since 1981, while house prices have grown exponentially over the same period. In the 90’s, a bank savings account offered 13% interest. Today it offers close to 0%.
For an investor in their 20s or 30s, buying a house or deploying cash in a fixed deposit isn’t a practical path to wealth creation. Unsurprisingly, millennials now have the smallest portion of generational wealth. According to the Federal Reserve, American millennials control only 5% of national wealth, while Baby Boomers control 53%.
Source: Business Insider
This gap in wealth creation opportunities may have made younger investors less risk-averse. After all, a high risk-high reward strategy makes more sense when there’s little to lose. This makes the volatility of digital assets like Bitcoin more palatable and the prospect of multifold price appreciation more attractive.
To sum up
Younger investors may have adopted Bitcoin as an investment because of the prevailing wealth gap, lack of wealth-building opportunities in traditional assets and their deeper understanding of digital tools. If these macroeconomic trends persist, future generations could be even more likely to adopt digital assets and cryptocurrencies as part of their portfolios.
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