The 2020s is the decade when the financial markets are no longer exclusive to professional traders. Thanks to the advancement of trading apps, trading has become accessible to everyone.
The crypto market, in particular, sees a massive influx of amateur money. An emerging generation of young, online-based traders dipping their toes into the financial world is driving the consistent growth of cryptocurrencies.
On 2nd March 2022, Bitcoin reached a new high of nearly $44,500. Some experts predict that the leading cryptocurrency can hit $200,000 by the end of the year.
Crypto trading has become a go-to conversation starter among millennials and generation Z. Bitcoin and the likes of it have become an obsession of many.
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There are many behavioral and psychological reasons behind the popularity of cryptos among amateur and inexperienced young traders. Read on to find out why this new generation of traders is eager to risk their money on volatile digital currencies.
The Power of Social Media
The rise of crypto communities on YouTube, Tiktok and Reddit contributes to the crypto mania.
Flooded with amateur traders and ‘finance gurus,’ social media platforms have made trading advice easily accessible. The abundance and availability of information have made it a lot easier to start trading cryptos.
Research has also suggested that social media can drive behaviors. Some studies have found that discussing trading and investment plans on online social platforms often encourages traders to become more risk-seeking.
The Thrill of Volatility
Renowned investor Kevin O’Leary has compared Bitcoin trading to a trip to Vegas. Warren Buffett, the CEO of Berkshire Hathaway, once described cryptocurrencies as a ‘gambling device.’
Gambling and crypto trading do share the same sense of thrill and excitement. While checking stock prices can often be dull, crypto trading is the opposite. The volatility of cryptocurrencies means their prices are constantly moving.
Crypto trading is particularly enticing for youngsters who have grown up with video games. The risks and uncertainties involved can satisfy their desire for instant gratification.
The Desire for Upward Mobility
The popularity of cryptos among young traders reflects the challenges they face in climbing the social ladder.
According to data from the US Federal Reserve, in the first half of 2020, millennials possessed only 4.6% of American wealth.
The interest generated around leading cryptocurrencies such as Bitcoin may indicate a lack of mechanisms that allow the younger generation to gradually build wealth.
Despite the high risks involved, crypto trading offers a high potential reward. While financial stability and homeownership seem to be available only to previous generations, digital coins provide young people with an opportunity to finally become wealthy.
The Construction of an Identity
Other than the opportunity to generate wealth, young traders are attracted to the culture around cryptocurrencies.
When investing in cryptos, you are not only buying the coins but also buying into a whole scene. As American billionaire Mark Cuban said, cryptocurrencies are ‘more religion than solution to any problem.’
The Bitcoin community, for example, has its jargon and exclusive events. Its conferences never fail to attract thousands of participants in pre-COVID times.
Being a member of the Bitcoin community can form a unique part of your identity. As cryptocurrencies are still relatively subversive, some traders engage in crypto trading to establish themselves as unconventional, radical and forward-thinking.