While traditional investments feel inaccessible, many see the volatility of cryptocurrency as an opportunity to make the kind of money they feel they’re no longer likely to accrue anywhere else.
Eammon, a 23-year-old biology student from Sydney, said he and a group of friends decided to put their collective energy into making money off crypto early in 2021, as the GameStop short shook Wall Street and meme stocks exploded in value.
While many of them had held tokens in the past, the sense of “peak hysteria” around crypto online propelled them to refocus on “actually making money this time”.
Since then, as coins like Bitcoin and Dogecoin have fallen from earlier peaks, Eammon admitted they’ve “all basically lost money so far” – but that they were still committed to investing in crypto long-term.
Property out of reach
Eamonn said part of the appeal was a sense that traditional means of wealth generation like property were increasingly out of reach for young people.
“A lot of our generation is kind of nihilistic in that we think, ‘I’ll never be rich, it’s too late,’” he said.
“House prices are so inflated that no matter how much saving we do now, we’ll almost never reach it.”
He also said the GameStop trading frenzy was a major topic of conversation among his friends at the time. To them, it was a fable about the collective strength of retail investors and those traditionally excluded from exercising market power.
Eamonn said that while he does have savings in an exchange-traded fund (ETF), he spends more time thinking about his crypto investments.
“Cryptocurrencies are quite exciting. And they make it feel like you could make 10 times your money overnight,” he said. “Which obviously doesn’t happen very often.
“I think people maybe embrace that volatility, because it seems like there’s not much to lose.”
Gen Z and millennial investors
Many Gen Z and millennial investors have bought into cryptocurrency and the technology that supports it.
In the first few months of 2021, the notoriously volatile crypto market saw astronomical surges in value, and Australians of all ages followed the hype.
More Australians now invest in cryptocurrencies like Bitcoin than precious metals like gold and silver, according to a report from BTC Markets, one of Australia’s largest cryptocurrency exchanges.
The exchange reported it onboarded one-sixth of its yearly customers in just six days in January 2021 as demand swelled, with its largest cohort being Australians aged between 25 and 34.
At the same time, more young people are jumping into the stock market.
Analysis of trading data by the Australian Investment Exchange (AUSIEX) found the number of Gen Z investors seeking out professional advice from financial planners or stockbrokers has tripled and the number of millennial clients has doubled.
A fear of missing out
Barney Tan, Associate Professor of Business Information Systems at the University of Sydney Business School, said that conversations around cryptocurrency are top of the agenda for many of his students.
Tan said around 40% of his students say they have put money into cryptocurrencies — though he admits there is a self-selection bias inherent to a group of students taking a digital innovation class.
He says there are a number of reasons he thinks young people are investing, one of which is a fear of missing out on a wave of opportunity.
He said influencers on social media flaunting aspirational lifestyles and wealth contribute to this.
“With Instagram [and] with Tiktok you see influencers flexing their wealth, you know, they’ll say, ‘Oh, I bought a new car after investing such and such an amount.’ And then these people become role models.”
Crypto herd mentality
Tan said another factor is a herd mentality driven by online communities, peer groups and influencers like Elon Musk.
Compared to any time in the past, the barrier to entry to investing is also lower, particularly when it comes to crypto exchanges.
“And the impression that it leaves on the minds of younger folks would be, if they can do it I can probably do it, too,” he said. “It’s not like what they’re doing requires anything that’s exceptional.”
Finally, Tan said a trend driving attitudes was social media’s tendency to only show “the good side” of investing.
“You only see the wins – you rarely ever see the losses,” he said.
‘I think Bitcoin will be our solution’
Marcus, a 30-year-old from Melbourne, said he initially started exploring crypto online in 2020 when the pandemic hit.
He had been feeling pessimistic about his financial situation before the pandemic.
“With COVID, I was lucky enough not to lose my job,” he said.
But he said time to reflect while locked down hammered home anxieties about his financial future that had been on his mind for a while.
Like Eamonn, a sense of hopelessness about the Australian property market propelled him to invest for the first time during the pandemic.
But for him, the GameStop saga highlighted a system where the deck was always stacked against people like him.
“What’s the point? Like if I’m not gonna win by not playing the game, and I’m not gonna win by playing the game, then I’m not going to win,” he said.
Crypto information sources
Marcus said that extensive research on Reddit, Youtube and other online sources have helped convince him that a monetary system bolstered by the blockchain is the only way to make financial systems fair.
He cited the example of Venezuela, which experienced 1.8 million percent inflation on their currency in 2018.
“At that point, you have to wonder if maybe our system doesn’t work,” Marcus said.
A commitment to ideals around decentralised finance have led Marcus to commit overwhelmingly to Bitcoin, with a long-term strategy of amassing it over decades.
“I think Bitcoin will be our solution in terms of a monetary policy,” he said.
He said he thinks crypto daytraders are missing the point.
“I think people get so blinded by that quick money-making opportunity; they saw someone else make so much money in a couple of weeks, so they think that they can, too.
“For me, that’s not really interesting, because if you can make money that fast, you can probably lose it that quickly.”
‘There’s actually something new’
Bryan Lee, a 33-year-old business analyst based in Sydney, said he started putting money into cryptocurrencies following “the whole thing with GameStop”.
He said that while he doesn’t have a huge amount invested – around $3,000 in Dogecoin – he likes the fact he’s participating in something that feels significant right now.
“If you want to call it my ‘biggest’ reason, at the time it felt like there was a strong community being built up,” he said.
He said putting money into crypto is almost like a hobby, an excuse to exchange memes and shitpost online. He said he doesn’t expect to make any real money.
“It’s nice if the stuff I’m investing in blows up. But I wouldn’t say it’s a number one priority.”
YouTube crypto influencers
Eamonn said another part of his experience has been an avalanche of advertising across YouTube, Facebook and Reddit pushing crypto exchanges on himself and his friends.
“I always get ads for Robinhood,” he said, which “look like ‘The Wolf of Wall Street’”.
He also said part of the effectiveness of exchanges advertising to himself and his friends was the fact many of them were more interested in what they saw as the relevance of crypto as opposed to more traditional investments.
“We talk a lot about crypto, but [my friends] wouldn’t be bothered to invest in something like an ETF, that’s a lot less risky and has an annual gain you can rely upon.”
Tan said this is a factor in crypto’s appeal. The “attractiveness or the potential for exponential gains” is a powerful force that attracts people toward cryptocurrency, Tan said.
More than anything, he said there was an overwhelming sense among his peers that they wanted to be engaged in a technology where “there’s actually something new”.
“Like a new sort of technology kind of really being built and integrated in all sorts of different ways around the world.”