Lifted by a flood of stimulus money, plus a sense that Congress would do anything to stave off an economic collapse, financial markets have spiked over the course of the COVID-19 pandemic—giving investors soaring confidence that they’ll become the next Warren Buffett.
Unlike the Oracle of Omaha, though, young investors think cryptocurrencies are their ticket to riches.
A recent survey by research and analytics company Engine Insights found that 31% of the U.S. adults it polled “believe they can become millionaires from crypto investments.” Of the Gen Z surveyed—that is, anyone born between 1997 and 2012—59% think crypto riches are their future.
The survey’s findings, based on responses from 1,027 people, are in many ways perfectly emblematic of the current moment. Crypto markets—despite a few bumps like this past week’s declines—have been on a tear in 2021. Bitcoin has doubled in value, Ethereum is up 450%, and meme tokens like Shiba Inu coin have dominated headlines throughout the year with huge increases in price. Viral stories of investing successes are frequent—helping fuel even more of a “Fear of Missing Out” investment philosophy.
And the young—especially young men—are particularly prone to the crypto sirens. More than 40% of 18-to-29-year-old men have either invested in, traded, or used a cryptocurrency, according to a recent Pew Research Center survey. Only 19% of women in the same age group had done so.
People in older age groups, not surprisingly, are less confident about their crypto investing talents, including even millennials. Forty-six percent of millennials surveyed by Engine Insights think they could strike millions with crypto investing.
Meanwhile, the Buffetts and Ken Griffins of the world have steered clear of crypto entirely.
Of course, younger investors approach crypto with a skewed perspective. Their elders have seen first-hand the ballooning and popping of market bubbles like those of the Japanese economy, the dot-com bust, and the U.S. housing market. But, at least in recent years, markets have seemingly only ever gone up. So why would the young think differently?
There’s no denying that crypto investing is risky. Just look at the lack of investor safeguards, volatility, and continued fraud. But for as many instances of SQUID-token losers, there are also plenty of Shiba Inu coin millionaires.
Where the crypto markets go from here is impossible to know, says Justin Castelli, chief of staff at Onramp Invest, which provides financial advisers software to help them monitor their clients’ crypto investments. But the question is a critical one for Castelli, who is also a registered investment adviser and one who thinks crypto is here to stay. His advice? Diversify and invest for the long term.
After all, Buffett did say in 1999 that a key to getting rich is starting early.
“I started building this little snowball at the top of a very long hill,” Buffett said, according to CNBC. “The trick to have a very long hill is either starting very young or living to be very old.”
A programming note: Rey Mashayekhi and I will be teaming up on The Ledger from now on, following the departure of Robert Hackett. As always, we’d love to hear from you—tips, news, and memes are always welcome.
Declan Harty
@declanharty
Declan.harty@fortune.com
DECENTRALIZED NEWS
Credits 🚀
A decentralized autonomous organization known as ConstitutionDAO failed in its push to buy one of the first-run copies of the U.S. Constitution after raising more than $40 million to do so... Sorry, r/WallStreetBets conspiracy theorists: A judge in Miami has dismissed a proposed class-action lawsuit against Citadel Securities and Robinhood that tried to make the case that the two companies colluded in shutting down trading in meme stocks earlier this year… Venture capitalists are seeing a wealth of opportunities to invest in crypto… Third-quarter average daily trading volumes at crypto derivatives exchange FTX.US spiked 512% from the prior period… It’s bonus season for Wall Street bankers, and the payouts figure to be rich… Private equity giant KKR plans to lead Anchorage’s upcoming Series D funding round… Bitcoin mining company Prime Blockchain is in talks to go public through a merger with 10X Capital Venture Acquisition Corp. II… A new NFT collection is offering investors a chance to listen to a never-released song demo by Whitney Houston that was recorded when the late singer was just 17 years old… The National Football League is now offering commemorative tickets in the form of NFTs.
Debits 🐻
Crypto markets have been in a sharp decline as of late... Over the last week, Bitcoin has tumbled more than 10%, while Ethereum, Cardano, Solana, and XRP have all dropped more than 13%, as of Tuesday midday, according to CoinMarketCap... Massachusetts Sen. Elizabeth Warren is urging the SEC in a new letter to Chair Gary Gensler to take a hard look at the SPAC deal between Digital World Acquisition Corp. and former President Donald Trump’s Trump Media and Technology Group… Binance has released a list of “fundamental rights” it sees as critical to consider in the discussion… Ripple Labs thinks the Securities and Exchange Commission, which it is currently fighting in court, should have a limited role in overseeing the space… Federal Reserve Governor Christopher Waller is worried about that innovation and competition in the payments business will be hurt by limiting stablecoin issuances to only banks… Twitter CFO Ned Segal is not quite on board with crypto yet, despite his boss’s full-throttle push into it… U.K. ad regulators are investigating a London-based ad campaign for meme coin Floki Inu… Investment company Balyasny Asset Management will no longer hire from the global fixed-income business at Ken Griffin’s Citadel… Movie studio Miramax has filed a lawsuit against Pulp Fiction director Quentin Tarantino for his plans to launch a collection of NFTs based on the 1994 movie… Michael Burry, the investor of The Big Short fame, ironically took to Twitter to take aim at Tesla CEO Elon Musk for his tweeting about selling stock… NFTs minted by celebrities like Grimes have seen dramatic declines in value.
FOMO NO MO
Where does Binance go from here? The world's largest cryptocurrency exchange Binance has seen a stunning rise in its four years of existence. It now handles $76 billion worth of cryptocurrency trading a day, more than what its next four biggest rivals do together. And its business stretches around the world, not unlike the very markets it operates in. But a regulatory crackdown on crypto is taking place around the world, and many officials including at the U.S. Securities and Exchange Commission and the Department of Justice are taking a close look at Binance's operations. So, how is the Changpeng Zhao-led crypto exchange preparing for its next evolution? Well, in an in-depth look at the company's evolution, the Wall Street Journal reports that Binance is working on obtaining the appropriate licenses to operate in markets around the world, preparing to hopefully take its U.S. business public, and even finally setting up a headquarters.
From the article:
Binance’s lack of a fixed location has puzzled regulators because they don’t know who would be responsible for overseeing it. Parent company Binance Holdings Ltd. is incorporated in the Cayman Islands. According to the Cayman Islands financial regulator, Binance isn’t registered or licensed to operate a cryptocurrency exchange from the country. And Binance doesn’t operate an exchange from there, said spokeswoman Ms. Jung.
Until September, however, Binance’s website in Australia said that Binance Holdings was the entity providing cryptocurrency exchange services for Australian users. Ms. Jung called that “simply a clerical error.”
Binance has 3,000 employees spread throughout the globe, Mr. Zhao said. Based on its trading volume and the transaction fees it charges, company insiders think that if Binance were public, it could be worth up to $300 billion, according to former executives.
That would make Mr. Zhao very rich. He said he is the largest shareholder of Binance.
BUBBLE-O-METER
$27 billion
A cryptocurrency backed by Chinese billionaire Wengui Guo and former Donald Trump adviser and recently indicted Steve Bannon soared to a $27 billion valuation in the weeks after its launch at the beginning of the month, Bloomberg News reported. Its backers aren’t the most peculiar detail of the coin, either. That title belongs to the 3-minute-and-34-second music video entitled “Hcoin to the Moon” that was released alongside its launch.
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Nearly everyone has heard of cryptocurrency but it's still mostly young men trading it by Marco Quiroz-Gutierrez
Millennials and Gen Z are a growing force in investing. The market needs to catch up by Jean Case
The streaking stocks of the new Big Three—Tesla, Rivian and Lucid—challenge the laws of market physics. Or do they? by Christiaan Hetzner
IBM debuts quantum machine it says no standard computer can match by Jeremy Kahn
(Some of these stories require a subscription to access. Thank you for supporting our journalism.)
MEMES AND MUMBLES
Sports fans, meet crypto. On Christmas Day, the Los Angeles Lakers, perhaps the most storied NBA franchise in history, will not be playing a home game at the Staples Center as they have for the last 24 years. The game will be in the same building, but rather than office supplies company Staples emblazoned outside, it will be Crypto.com, as the venue is being renamed Crypto.com Arena. It’s far from the crypto industry's first effort to market to sports fans. Sam Bankman-Fried’s FTX, for one, has taken over arena sponsorship for the home of the Miami Heat and renamed the field where the University of California at Berkeley’s Golden Bears have played football for almost 100 years. Now the question is whether Crypto.com Arena and FTX Arena go the way of becoming the next Wrigley Field (originally named for the chewing gum pioneer who owned the Chicago Cubs) or U.S. Cellular Field (the home of the Chicago White Sox previously named for the cell phone carrier until it was rebranded Guaranteed Rate Field.)
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