The last year has seen a sharp decline in Americans’ level of comfort with cryptocurrencies.
In 2022, the appeal of cryptocurrencies such as Bitcoin has plummeted. Americans of all age groups have become increasingly uneasy with cryptocurrency in the last year, as the value of these digital currencies has plummeted at an alarming rate.
Crypto, which is typically not backed by any tangible assets or cash flows of an underlying entity, has dropped precipitously as the Federal Reserve has kept to its promise to raise interest rates aggressively in order to combat inflation and has now done so. Furthermore, some investors are concerned that additional government regulation proposed by the Biden administration, such as a central bank digital currency, will derail the cryptocurrency market.
Social media is an unreliable source of financial information.
Why are millennials and Generation Z so interested in cryptocurrency when several financial advisers and otherwise investors, including Warren Buffett, have warned of its dangers? One explanation could be that there is a dearth of reliable financial information available on social media, where the hoopla is only constrained by the creativity of the influencer, particularly when it comes to the poorly understood subject of cryptocurrencies.
According to a 2021 CreditCards.com survey, social media platforms or influencers were the second most preferred source of financial advice for Gen Z, with 28% using it, trailing only friends and family (53%). Millennials used social media at a similar rate (24%), while Gen X and baby boomers used it at 10% and 4%, respectively.
However, American adults agreed that social media was not a reliable source. They rated social media as the least trusted of their financial advice sources. Only 21% thought social media was reliable, while 65% thought it was not.
Financial advisers were rated as the most trustworthy (70%), but they were consulted extremely rarely by Gen Z (16%), millennials (21%), and Gen X (20%). In comparison, approximately 29% of baby boomers sought advice.
Cryptocurrency carries significant risks.
Of course, those promoting cryptocurrency on social media, whether rightfully or not, can easily pique interest with promises of immense wealth and flashy cars from trading. However, the truth is that the majority of traders lose a lot of money, which can be difficult to see amid the glitz.
As with any investment, whether it’s stocks, funds, real estate, or something else, you should understand what you’re getting into and how you will profit from it.
Investors are also concerned about how the federal government of the United States will regulate cryptocurrency. The government is concentrating its efforts on a number of issues, including the prevention of illegal transactions and other financial fraud, as well as the protection of investors. It is also thinking about developing a central bank digital currency that would function as a “digitized dollar.”
This could be detrimental to cryptocurrencies. If there was a digital US currency, Fed Chair Jerome Powell believes that stablecoins and cryptocurrencies won’t be needed.
As a result, regardless of your age, cryptocurrency is a high-risk game in which you could lose the majority or all of your money. Given the dramatic drops in cryptos in 2022, it’s understandable why millennials—indeed, all significant age groups—have grown wary of it.
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