Bitcoin mania hit a new high in early October when the cryptocurrency's value surpassed the $64,000 mark, having more than doubled its value since the start of 2021. Other cryptos have also spiked in value: Ethereum is five times higher than it was at the beginning of the year, and dogecoin, which started as a joke and was valued at four-thousandths of a cent in December 2020, is now worth 25 cents.
Now, nearly half, 49%, of millennials are comfortable owning cryptocurrency, according to a new Bankrate survey of over 1,000 adults conducted by phone. And about 12% of millennials think crypto is the best way to invest money they won't need for 10 years or more, according to the survey.
"That's tremendous," says James Royal, a senior reporter with Bankrate who worked on the survey. It's not surprising that younger investors are more open to crypto, he says. "I sort of expected it to be higher than other age groups. But this seems really extraordinarily high."
Millennials' interest in crypto is significantly higher than that of older generations, particularly baby boomers: Only 22% of them are comfortable owning these kinds of digital assets. "A lot of people see crypto as a kind of lottery ticket," says Royal, and that mentality helps explain the high interest among people under 40.
Another reason that so many younger investors are likely more comfortable owning crypto could be the fear of missing out on a big thing, Royal says. "People see it climbing, and they think their neighbor makes 100% in money on the volatility," he says, "And they say, 'Hey, look. I want a piece of that too.' I think it's absolutely fear of missing out as well."
That volatility that makes crypto so alluring, however, cuts both ways. Its highly speculative nature means it can be worth a lot one day and half that value the next.
"They could easily make 100% in months as we've seen this year. In fact, we've already seen it twice," Royal says. "We've seen bitcoin double in the first few months from the start the year to the first few months. We've seen it lose 50%. We've seen a double again in just a few months."
At the heart of all that volatility is the fact that crypto is mostly speculation, Royal warns, and it's imperative that any investor keep that top of mind before putting any money on the line. You're investing in "the optimism that somebody is going to bet somebody's going to come along behind you and be even more optimistic about this and purchase it from you," he says.
That fear of missing out is definitely something financial advisors have seen on the ground, including Simon Tryzna, chief investment officer at ClearPath Capital Partners in San Francisco. "A lot of people wanting to get into it, unfortunately, aren't for all the right reasons," he says. "I think a lot of them see this as a quick way to make money and have FOMO."
There are investors who see potential in crypto beyond the day-to-day rollercoaster, particularly as a vehicle to counter future inflation, Tryzna says. "I think for a lot of the people that I've talked to and a lot of the clients that I have, they see the long-term potential of it," he says.
Ultimately, investing in crypto is a personal choice, but he advises that anyone jumping in know exactly what they're getting into. "Understanding what your goals are" is key to making that decision.
"FOMO should not be the reason you invest in crypto," Tryzna says. A more appropriate approach might be, "You know, 'I've done my homework on [this coin], and I think this is an inflation hedge,' and they think it's going to appreciate, so put some money into it."
Video by Helen Zhao
However, Tryzna does believe there can be space for crypto investing in your portfolio if you have your other bases covered (including a diversified portfolio of low-cost investments and adequate savings).
"You shouldn't prioritize investing in crypto over some of the other more important goals," he says. "If you have student loan payments that you need to be paying," don't use that money to get into crypto. Be "cognizant of the risks that you're capable of taking and not overdoing it."
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