According to an article recently published by MarketWatch, Bitcoin has had a wild ride, and millennials have decided to go along for it. Bitcoin peaked near $20,000 per coin in 2017 but its prices fell below $7,000 in the past few days, losing more than $100 billion in valuation since last week. The overall cryptocurrency market cap has fallen more than 50% since early January, according to CoinDesk, plunging from $830 billion to $366 billion.
People between the ages the ages of 18 and 39 are less likely to invest money in the stock market than other generations, studies show, says the report. Despite the unpredictable nature of cryptocurrencies, many millennials find investing in it less intimidating than putting money in the stock market or other traditional investments. Only one in three millennials are investing in the stock market, compared to 51% of people of the following generation (36-51) and 48% of baby boomers (52-70), a 2016 study from personal-finance site Bankrate found.
Over 82% of millennials say their investment decisions were influenced by the Great Recession when $14 trillion in wealth was lost. Many saw 50% or more wiped off their parents’ or older siblings’ wealth.
The study asked consumers what they would do if they were given $5,000 to invest all in one place. 12% of millennials aged 18 to 34 said they’d invest it in cryptocurrency over any other type of investment versus 3% of those aged 45 to 54 and 55 to 64. One explanation says the report: Bitcoin was created after the 2008 financial crisis as a means to exchange money without relying on big banks.
Andrea Coombes, retirement and investing specialist at personal finance resource NerdWallet, says “…just because bitcoin is hot right now does not make it the most ideal investment choice… for millennials or anybody else… If you want to spend money to play with cryptocurrency… make sure it’s money you are willing to lose.”
“Bitcoin’s anti-establishment roots and decentralized system brings with it the hope for a new economy that puts people over corporations,” she said. “This is an extremely appealing message to millennials who watched their job outlooks dwindle as the financial crisis unfolded in tandem with their first-ever entry into the job market.”
The temptation to hop on the bitcoin train as prices jumped more than 400% in 2017 is indicative of millennials’ stereotypical desire for instant gratification, notes Coombes. They’ve heard tales of people who get rich quickly with the currency, but consumers can open an account with Vanguard for as little as $1,000 or consider apps like Acorns, which target millennials who want to enter the investment world with small amounts of money. “…It sounds boring and is not as sexy as bitcoin, but if you have long term goals those vehicles are going to get you there,” Coombes said.
For more details from MarketWatch, please visit here.