Cryptocurrency investments are becoming increasingly popular as the prices go sky-high. Like any kind of innovation, it attracts numerous young people with its disruptive potential and a promise of high profits. However, a careless attitude to high-risk investments can have a devastating impact on their lives.
Digital assets including Bitcoin (BTC) have a common feature called ‘volatility’ that makes it alluring and risky as an investment tool. Ordinarily, the higher the volatility, the riskier the investment.
If an investor puts his money in Bitcoin or any other form of digital currency, the risk becomes relatively high compared to other investments alternatives such as gold, private equity, private debt, hedge funds, commodities, collectible, structured products, and others. Cryptocurrency-related damage can affect manifold spheres of life, including financial and health problems, psychological and emotional torture, and vitiated social and cultural relationships.
Bitcoin and the entire cryptocurrency market has received a massive boost globally because of the Covid-19 pandemic that has shown people that they can actually conduct businesses online by working from home, order and pay for goods and services without paying using cash, as well as earning profits without much toil by investing in virtual coins.
A lot of people are investing funds into cryptocurrencies. But on the other hand, crypto investments are often referred to as gambling due to the high level of risk.
Generally, the fringe between investment and gambling is quite unclear. When investing in startups or innovations, a person can’t be 100% sure whether the money will be recovered or not. So it might be considered gambling to some extent. If poorly calculated, investing in bitcoin or any other asset with high volatility can leave a person totally bankrupt, homelessness, and escalate debt and financial strain. And the ability to calculate thoroughly is not something youth can boast of.
The research by the UK’s Financial Conduct Authority has discovered that almost 59% of young investors revealed that a big investment loss causes a colossal impact on their lives. It is clear that most of the youth are now engaged in risky investments including cryptocurrencies and foreign exchange. It’s the millennials that are pushing forward the cryptocurrency economy, as per the report by CoinIdol, a world blockchain news outlet. Out of the 43 million active cryptocurrency traders globally, and about 23% of these traders are millennials.
According to the FCA, most of these young investors (millennials) are being tempted to buy higher-risk assets like BTC by the promotions and ads from social media platforms such as YouTube, TikTok, Facebook, online adverts, high-pressure sales tactics and other news platforms.
Cryptoasset has an identity crisis, is not regulated or managed by any government or central bank, and is extensively utilized for illicit activities such as money laundering and terrorism financing. The youth who are cryptocurrency maniacs should also only invest money they can afford to lose to avoid the negative effects of high-risk deals.
Instead of carelessly investing in high-risk assets like cryptocurrency, young generations should be encouraged to invest in lifelong assets such as tax-sheltered retirement plans, annuities, Robo-advisors, exchange-traded funds (ETFs), real estate, stocks, long-term bonds, mutual funds and others.