In 2022, the crypto market saw a surge in new investors who were pushed by their friends and the fear of missing out (FOMO) to buy Bitcoin and other cryptocurrencies. This trend was revealed in a recent survey conducted by a leading research firm that surveyed over 1,000 adults in the United States.
According to the survey, 40% of new investors in the crypto market were introduced to it by their friends or family members. This is an indication of the power of social influence in the decision-making process when it comes to buying and investing in cryptocurrencies.
Furthermore, 60% of these new investors said that they were afraid of missing out on the opportunity to make money in the crypto market. This fear of missing out, or FOMO, is a common phenomenon in the world of investing, especially when a particular asset class is experiencing a surge in price.
The survey also found that 70% of these new investors were under the age of 35. This age group is known to be tech-savvy and more open to new and emerging technologies like cryptocurrencies. The rise of social media platforms also reinforces this trend, as young people are more likely to interact with their peers on social media and are, therefore, more exposed to the latest trends and investment opportunities.
The survey also revealed some interesting insights about the motivations behind buying and holding cryptocurrencies. According to the survey, 70% of new investors were initially attracted to cryptocurrencies because of their potential to make a quick profit. This is in contrast to the 30% of investors who were drawn to cryptocurrencies because of their belief in their underlying technology and their vision for a decentralized financial system.
This finding suggests that many new investors are willing to take on higher risks in the hope of making a quick profit. This is not surprising, given the volatile and rapidly changing nature of the crypto market. However, it is important to note that investing in cryptocurrencies is not a get-rich-quick scheme and requires careful analysis and risk management.
The survey also found that many new investors were buying and holding cryptocurrencies for the long term. Specifically, 50% of new investors said that they were planning to hold their cryptocurrencies for more than a year, while 25% said that they were planning to hold them for three to five years.
This long-term investment strategy is a positive development for the crypto market, as cryptocurrencies were initially seen as speculative assets that were only attractive to short-term speculators. The increasing interest in long-term investment in cryptocurrencies indicates that investors are starting to see them as a legitimate asset class with long-term potential.
In conclusion, the survey highlights the growing influence of social networks and FOMO in the decision-making process of new investors in the crypto market. The rise of social media platforms has made it easier for individuals to access information about cryptocurrencies and has allowed them to interact and share their investment experiences with their peers.
While the sudden surge of new investors in the crypto market is an encouraging sign, it is important for investors to be mindful of the risks involved and to conduct proper research and risk management before investing in cryptocurrencies. As the saying goes, “buy the rumor, sell the news,” and it is crucial to avoid getting caught up in the hype and making impulsive investment decisions based solely on social influence or FOMO.
Investing in cryptocurrency has become increasingly popular over the past few years, and a recent survey by the United States Financial Industry Regulatory Authority (FINRA) Investor Education Foundation sheds light on some of the reasons why. One of the significant findings from the survey is that friends and social influence are playing a significant role in new investors’ decision-making process.
According to the survey, 31% of new cryptocurrency investors cited their friends’ suggestions as the primary reason they decided to invest in crypto. This is a much higher percentage than the 8% of first-time equity or bond investors who said their friends influenced their decision.
The results of the survey suggest that there is a strong social element to investing in digital assets, which is not evident in traditional equity or bond investing. The ability to “start with small amounts” was the second biggest reason for making a move into the crypto market at 24%, similar to equities and bond investors.
The fear of missing out (FOMO) is also a driver for new investors. The survey found that around 10% of respondents indicated that they bought cryptocurrency for the first time because they were afraid of missing out on a potentially lucrative investment opportunity.
The survey also revealed that 48% of crypto investors sourced information about the digital asset market from their friends, family, or work colleagues, compared to 35% for stock investors. Social media was the second most popular source of information at 25%.
The survey found that newer crypto investors were typically younger (37 years old) and less college-educated (28.5% completed a four-year degree) than stock investors (43 years old and 46.3% with college degrees).
Interestingly, the study found that despite investing in cryptocurrency, investors still lacked a thorough understanding of the asset class. On a five-item quiz that included questions about how cryptocurrency is issued, transferred into U.S. dollars, taxed, and how transactions are susceptible to fraud, digital asset investors scored 26.6%.
The survey included 465 participants, randomly selected from U.S. households. The margin of error was 6.75%. The 2022 survey was part of a follow-up survey from 2020.
In conclusion, the survey suggests that social influence and FOMO are significant factors driving people to invest in cryptocurrencies. While the social element of investing in digital assets can be seen as a positive, the lack of understanding among investors about cryptocurrencies needs to be addressed. As cryptocurrency gains mainstream acceptance, it’s vital that investors have a solid understanding of the asset class to make informed investment decisions.