Recent studies suggest that growing a percentage of Millennials (born 1981-1996) would prefer investing in Bitcoin over bonds, stocks, real estate and even gold. Really?
Although his testimony is largely anecdotal, the data seems to back this up.
- 42% of 18-34 year olds said they were ‘very’ or ‘somewhat likely’, up 10 percentage points from 2017,
- 35% of 35-44 year olds said they were ‘very’ or ‘somewhat likely’, up 1 percentage point from 2019,
- 25% of 45-54 year olds said they were ‘very’ or ‘somewhat likely’, up 10 percentage points from 2017, and
- 8% of 65+ year olds said said they were ‘very’ or ‘somewhat likely’, up 4% points from 2017.
Notice the generational gap?
Almost half of Millennials plan on purchasing Bitcoin compared to only one quarter of 45-54 year-olds. On the low-end of the spectrum, understandably, less than 10% of 65+ year-olds plan on purchasing Bitcoin. This is explained by the fact that the older you get, the more risk-averse you become. Indeed, by the time you reach retirement age you should hopefully have saved enough to retire comfortably and prefer the safe and stable returns of bonds.
The question is why would the younger generations be so keen to invest in a high-risk, newly invented and often difficult to understand digital asset?
REASON 1: GRIM ECONOMIC PERSPECTIVES
The hippy counter-culture was short-lived and quickly gave way to the “socially liberal but fiscally conservative” yuppies who made their peace with capitalism and took advantage of a booming stock market.
However, although a large minority of boomers are able to retire comfortably, the recent economic downturns have hit them hard and the vast majority is staying in the workforce at rates not seen in generations for people their age.
Despite the system letting them down, they prefer investing in traditional assets like gold, real estate and stocks/bonds.
In contrast, Millennials never experienced the “golden age of capitalism” and grew up in the 1990-2000s era when Western economies started to run out of steam and jobs started moving South and East.
May young adults take on huge debt to go to college – national student debt in the USA totals close to $1.5 trillion – yet paradoxically they are known as a “pessimistic generation“: 78% are worried about having good-paying job opportunities and 79% are worried they won’t have enough money to live on when they retire.
The system is no longer delivering on its promise of providing cushy jobs to college graduates.
Further, the housing bubble which led to the 2007 financial crisis dealt a lethal blow to the confidence this generation has in its political institutions, the economy and its traditional investment instruments.
It is no surprise that Satoshi released the Bitcoin whitepaper less than two years after the outbreak of the worst economic downturn since the Great Depression. Indeed, BTC was presented as a viable alternative to a debt-based inflationary currency seen as largely responsible for the economic woes of the past century.
Worse yet, income inequality is increasing and people no longer believe the “American Dream” is a reality. “The rich get richer, the poor get poorer” is no longer just a populist slogan – it’s actually happening.
Thus, Millenials are looking for a way out of the traditional economy they feel has excluded them.
REASON 2: ADVENT OF THE TECHNOLOGY AGE
The rise of the internet and video games introduced the concepts of peer-to-peer transactions and digital assets to millions of Millennials.
From MSN messenger and World of Warcraft to Facebook and Twitter, they grew up with technology and were introduced early to the concept of “being connected” to people from around the globe. Also, the huge popularity of illegal peer-to-peer downloading platforms such as Napster, KaZaa and eDonkey2000, cultivated a sense of “sticking it to the man” that lives on today in the cryptocurrency sphere.
Thus, the online generation is naturally more receptive to digital assets than ageing boomers and Xers. A survey of one thousand online traders confirms this growing divide as it revealed that 43% of Millennials trust cryptocurrency exchanges more than US stock exchanges, compared to 77% of boomers.
Millennials are also at the heart of the technology revolution: Growth of e-commerce and the progressive decline of classic retail, rise of e-banking, the move towards a cashless society, social media and the end of privacy, facial recognition software, are all trends are all being spearheaded by Millenial/Gen. Z consumers.
The digital age is reshaping the Millennials’ rapport to financial transactions and privacy.
Indeed, it appears they don’t mind sacrificing their privacy for the sake of convenience. For better or for worse, the trend is moving in the direction of increased openness and transparency in all sectors of life.
Lastly, from a purely practical point of view, the newer generation is keen on quick and inexpensive peer-to-peer transactions. Bitcoin and cryptocurrencies in general provides a reliable alternative to the expensive and slow systems currently used by banks and money transfer companies.
Case in point: To send $1000 in BTC equivalent to another wallet, Bitcoin transaction fees could range from $0.09 to $0.52 whereas sending $1000 by Western Union could cost anywhere from $17 to $70!
CONCLUSION: TOMORROW’S INVESTMENT LANDSCAPE
The question now is what will the investment landscape look like in 10, 20, 30 years from now?
Obviously, traditional assets like the stock market, gold and real estate will remain attractive investments.
However, as Boomers and Generation X slowly fade away, Millennials and Generation Z will take control of the markets and digital assets will play a prominent role in the investment portfolios of tomorrow.
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