Young Crypto Investors Still Bullish Despite 2022 Market Crash: Study

Various tokens of cryptocurrencies. (R. Classen/Shutterstock)

It has been a tumultuous year for the cryptocurrency industry, from the crash in prices to the FTX meltdown. However, a new study finds that hasn’t discouraged many young investors from parking their disposable income in crypto.

According to a new Crypto State of the Industry Report by brokerage firm tastyworks, Generation Zers and millennials are investing in virtual tokens.

The report found that 21 percent of 18- to 24-year-olds, 34.9 percent of those 25 to 34, and 21.4 percent of 35- to 44-year-old individuals are trading digital currencies. While Gen Z is bullish on Bitcoin, millennials are more invested in Ethereum.

Overall, more than half of Gen Z and millennials want to incorporate cryptocurrency into their retirement plans.

The authors discovered some other findings about the state of crypto in 2022.

Dogecoin, Axie Infinity, Shiba Inu, Ripple, Uniswap, and Elrond were some of the other most popular cryptocurrencies outside of Bitcoin and Ethereum this year. Investor sentiment was mostly positive for many of the top digital currencies, from Litecoin to Chainlink to Uniswap.

A representation of cryptocurrency Bitcoin is seen in front of a stock graph and U.S. dollar in this illustration, on Jan. 24, 2022. (Reuters/Dado Ruvic/File Photo)

In the United States, the most popular place for investing in crypto was Phoenix, which represented 3.41 percent of all U.S. crypto trades. This was followed by Bowie, Maryland (2.67 percent); Valley Springs, California (2.28 percent); and Frisco, Texas (1.58 percent). States with the largest number of Bitcoin ATMs based on population sizes were Rhode Island (168), New Mexico (315), Texas (4,341), Connecticut (505), and Tennessee (963).

But while younger investors might be optimistic about crypto, opinions are mixed heading into 2023.

Will Bears Reign Supreme in 2023?

Most digital currencies suffered sharp losses this year. Bitcoin lost 63 percent, Ethereum plunged 66 percent, Cardano tumbled 78 percent, Dogecoin shed 50 percent, and Solana lost 92 percent.

Since peaking at $2.83 trillion in November 2021, the total crypto market cap declined by about $2 trillion.

The debate is if the crypto winter will continue to endure a deep freeze next year or thaw out. The analyses have been mixed heading into 2023.

Global investment manager VanEck, for example, projects that Bitcoin could rally to $30,000 in the second half of 2023, after plummeting to as low as $10,000 in the first quarter.

Matthew Sigel, VanEck’s head of digital assets, thinks there will be many bankruptcies of crypto miners that might “mark the low point of the crypto winter.” However, Bitcoin prices could enjoy a rally on “lower inflation, easing energy concerns, a possible truce in Ukraine, and a turnaround in M2 supply.”

The M2 is a measure of the money supply that includes cash, checking deposits, and easily convertible near money, such as government bonds.

For advanced economies, investors will view crypto as a hedge against the Federal Reserve’s M2 money supply, while developing markets will concentrate on alternatives to the “dollar hegemony” as a world reserve currency.

“Meanwhile, should our recession expectations materialize, the Federal Reserve would likely pause raising rates amid softening inflation, while money printing and government budget deficits continue,” Sigel wrote. “Merely a lack of bad crypto-specific news, under the above scenario, could cause the price of Bitcoin to climb a wall of worry back to $30,000 again.”

Bitcoin could, however, plunge about 70 percent, to $5,000, next year, says Eric Robertsen, Standard Chartered’s global head of research, citing more “bankruptcies and a collapse in investor confidence in digital assets.”

Spillover Fears

Although crypto prices have cratered since peaking in November 2021, there has been heightened concern that the collapse of the FTX exchange could spark a contagion effect for the broader financial markets. But speaking in an interview with CNBC, Laith Khalaf, an investment analyst from AJ Bell, doesn’t see “signs of spillover” from crypto into conventional assets.

“Crypto has a lot of money, but it’s kind of built up as a separate ecosystem,” he said. “If we had a more system-wide issue, you could start to see it affecting other assets, but I don’t really see that.”

Despite crypto assets and stocks trading mostly separately over the years, there has been a growing correlation between the two markets, according to the International Monetary Fund (IMF).

Because crypto assets have matured from a decade ago, with Wall Street embracing the digital asset revolution, IMF economists purport that Bitcoin and stocks share similar movements. As a result, there could be “ripple effects.”

“Increased crypto-stocks correlation raises the possibility of spillovers of investor sentiment between those asset classes. Indeed, our analysis, which examines the spillovers of prices and volatility between crypto and global equity markets, suggests that spillovers from Bitcoin returns and volatility to stock markets, and vice versa, have risen significantly in 2020–21 compared with 2017–19,” the IMF stated in a report earlier this year.

Since its early days, cryptocurrencies have been mainly affected by regulatory changes, developmental adjustments, and investor sentiment. However, market experts are witnessing increasing signs that crypto is being influenced by the same factors as stocks, be it monetary policy or geopolitics.