Cryptocurrency has been all the rage lately, as interest in this form of decentralized cash flow has surged across the world. Though cryptocurrency dates back to 2009, it only recently began to gain real traction. The jargon-filled conversation surrounding cryptocurrency and blockchain, in addition to the notoriously unpredictable spikes and crashes of the crypto market, deem it an almost impossibly indecipherable phenomenon. Among the most interesting pieces to this puzzle is the spike in the number of crypto investments made by the university-age demographic.
Investments in cryptocurrency are made in anticipation of an increase in value of an asset. This may stem from an increase in the usefulness of that asset in the blockchain or from heightened demand by other investors. Unlike traditional stocks, however, the valuation is not tied up with expected changes in the value of an underlying company. According to Nasdaq (National Association of Securities Dealers Automated Quotations), cryptocurrency/blockchain is essentially a “system of value” in which transactions, acting as “blocks,” are added to a “chain,” which is made publicly available.
Thrust into heated controversy, cryptocurrency is deemed by champions of the blockchain as a more transparent approach to sending and receiving money, and it renders obsolete the need for intermediary forces like banks and PayPal. On the other hand, many express deep concerns about the significant potential for cybercriminal activity and the gross amounts of energy needed to run the system over a vast network.
The increasing appeal of cryptocurrency investments to young people becomes blatantly clear from a cursory glance at the demographics comprising users in major crypto exchanges. 15 to 20 percent of all users from the top exchanges are students aged 18 to 20. 30 percent of all student investors in cryptocurrency come from an engineering or technology background, according to The Economic Times. The BBC reports that although investing in cryptocurrency is still a niche activity—with only six percent of those surveyed having reported trying it—the figure still represents a threefold increase from the previous year.
With the rising costs of living as a university student, these individuals are increasingly turning to alternative modes of revenue. Indeed, three-quarters of students surveyed by BBC claim to have considered dropping out of school, with almost half of them citing financial difficulty as the primary reason. But others suggest that financial reasons are not the sole factor influencing university students’ decisions to invest. The Financial Conduct Authority points out that the “challenge, competition and novelty” inherent in crypto investments add to the “thrill” of the game. Additionally, major companies such as Tesla play no small part in encouraging young people to consider investing in cryptocurrency, as the company recently announced that it purchased $1.5 billion USD worth of Bitcoin and would begin accepting crypto as payments.
Stakeholders are itching to receive solid predictions on the long-term fate of cryptocurrency, but the waters are evidently muddy, especially in regards to legal and regulatory matters. Different nations have instigated starkly contrasting conversations on how best to regulate cryptocurrency: on one hand, China recently deemed all cryptocurrency exchanges illegal, while in the United States, the messaging has been far from clear as to governmental agencies’ role in regulating the crypto industry.
From a corporate point of view, there is at least some evidence to suggest that an increasing number of companies will begin to accept cryptocurrency as valid forms of payment. AMC, for instance, announced that it will accept Bitcoin by the end of 2021, while Amazon recently published a job post for a “Digital Currency and Blockchain Product Lead.” Kiana Danial, author of Cryptocurrency Investing for Dummies, curtly predicts that the future of cryptocurrency will be characterized by “volatility [in the] short-term and growth [in the] long-term.” Without historical data upon which robust predictions can be based, most efforts to pinpoint how the cryptocurrency industry will pan out are speculative at best.
To this end, many financial agencies have issued recommendations and best practices for individuals interested in investing in cryptocurrency, especially for young people and university students. In her NextAdvisor article, personal finance reporter Ryan Haar advises to “never put crypto investments above other financial goals like saving for retirement and paying off high interest debt.” The Financial Conduct Authority encourages young people to ask themselves if they are comfortable with the level of risk associated with crypto investments and to ensure that they have secured protective mechanisms in case their investments fall through.
