If you don’t follow the cryptocurrency market, congratulations! Your blood pressure has probably been just fine the past week or so, instead of spiking every time Bitcoin sunk deeper into the abyss that is the market.
The short version is this: along with the “established” economic markets, cryptocurrencies have experienced a wild downward swing in recent days, making headlines. Bitcoin, the largest cryptocurrency, dropped by ~70% and Ethereum (the next most popular cryptocurrency) dropping ~75%.
However, it doesn’t stop there. NFTs, found everywhere in the news these days, have also declined hard with many investment values dropping over 90%. The market has gone from bull to bear (good to bad) as the economy has staggered and slumped.
You don’t have to understand economics to make sense of the wider trends that are occurring, and that isn’t even the real story here. What’s interesting is that young people – up to 30% of the 18-29 year old bracket by some estimates, are buying into these volatile markets. And they’re in favor of the “new” currencies, not the “old” stocks and bonds.
The highly simplified explanation of crypto assets is: when the 2008 market collapse happened, a group of people who were tired with the corruption and bailouts of banks decided to urge the widespread use of digital currency, decentralizing finance and using an immutable ledger system to approve transactions between users. If this sounds familiar, you’ve been paying attention – this is blockchain technology, which we covered in our NFTs article.
Bitcoin was the first major coin to appear, appearing before a surge of others that has shown no sign of waning. Young people are investing robustly, sometimes their entire savings, into a market that’s at times more volatile than the stock market.
It’s possible that the upcoming generations have seen the writing on the wall and lost faith in the traditional banking system, but are hopeful enough in the solid foundation of the blockchain that they’re willing to risk it.
However, we believe the ultimate takeaway is that despite a few recent security issues, this is more of a story of the weakness in the macroeconomy. That, and that the fundamental rationale and technology behind it hasn’t changed. Further, this cyclical and volatile nature of cryptocurrencies has been experienced before, often every four years and usually for a variety of reasons – including user experience issues and China ‘banning’ crypto. However – these markets, much like equity (stock) markets, are also invested in by large institutions, and as such carry manipulation in the form of trading and press ‘massaging.’ And so the fundamental rational and premise still stands.
So Z-llennials are hedging their bets with Web3 and the future of crypto being brighter than the current downturn is indicating. And to our eyes – it’s a smart bet.