The crypto landscape has been exceptionally volatile this year, with billions of dollars vanishing overnight through unfortunate events such as the Terra-Luna crash and FTX’s collapse. The industry that was previously valued at US$3 trillion last year now sits at US$900 million.
The onset of the recent events in the industry has only accelerated the ongoing crypto winter, with cryptocurrencies such as Bitcoin plunging 23 per cent last week to hit a two-year low of under US$16,000.
These events have dried up investors’ funds and eroded the trust in the industry, which was itself created as a response to a loss of faith in traditional finance following the 2008 financial crisis.
In addition, due to the crypto winter, the crypto industry has also seen layoffs from the likes of Coinbase and Crypto.com as a bear market sweeps the industry.
Despite the hot water the crypto industry has landed itself in this year, millennial and Gen Z Singaporeans are still bullish on the crypto market.
Currently, close to one in five (18 per cent) of Singaporeans in their 20s are invested in cryptocurrencies.
About two in five of them are still planning to invest in crypto within the next 12 months, although about two in five (42 per cent) of them made an overall loss on their investments, up 19 per cent from last year.
Meanwhile, Singaporeans in their 30s also display a similar risk appetite — 14 per cent of them are invested in cryptocurrencies, in contrast to the measly eight per cent of Gen Xs aged between 40 and 54, and four per cent of baby boomers aged 55 and above.
More than a third (35 per cent) of Singaporeans in their 30s who have invested in cryptocurrencies have made an overall loss, up 10 per cent from last year.
But why exactly are millennials and Gen Zs steering towards crypto despite its volatility?
The crypto market has only come crashing down since late 2021, yet Gen Zs and millennials still remain hopeful for crypto’s upturn.
Citing a quote from the book Rich Dad, Poor Dad by Robert T. Kiyosaki and Sharon Lechter, Dave* (not his real name), a 29-year-old who lost US$7,000 in the FTX crash said, “I remain bullish on crypto. Crypto is not the same as Sam Bankman-Fried. It’s not crypto that’s the problem – it’s FTX.”
Dave started investing in crypto back in September 2020, when the crypto market was down.
He grew wary of the rumours surrounding FTX way before its crash, and decided to empty half of his holdings in FTX to his cold wallet on November 7, which transacted as usual — giving him the false confidence that the digital currency was still stable.
However, two days later, he had the gut feeling to withdraw his remaining monies to his cold wallet, but it was too late for Dave. His investment of US$7,000 was wiped out.
Losing his money in FTX gave him a much-needed pause to rethink his believes about crypto and its future.
Despite the loss, Dave still strongly feels that crypto will have a place in the future — although the FTX crash may set back crypto’s progress by a few years — and hence, he still plans on investing in cryptocurrencies.
Echoing his sentiments is Anna*, a 27-year-old who has been investing in crypto since early 2020.
“In my opinion, the crypto market is still nascent and we are still early on. Just because the crypto market has not been doing great for some time doesn’t mean that it has “failed” — nothing only ever goes up.”
She explained that markets like crypto are volatile in the short-term, and tend to trend upwards in the long run, likening the volatility of crypto to gold after the end of the Gold Standard.
“Most people are treating crypto like a speculative asset, hence the behaviour of the crypto market mirrors this. I believe that the volatility of crypto will die down just like gold once it hits a certain market cap.”
Anna lost quite a sum of money in the FTX crash and the Terra-Luna crash, however she still remains optimistic on the future prospects of crypto. “These things happen, and should be expected from a market as volatile as crypto,” she said.
“When the volatility of crypto dies down, crypto will still not be as stable as fiat. But in the end, crypto’s short-term volatility will offer long term growth, in contrast to the long-term decrease in purchasing power from the short-term stability that fiat grants.”
Agreeing with this, Dave* said that the current volatility of crypto’s price also does not bother him as he invests for the long run.
“The FTX crash, if anything, was needed as it pushes towards the need to regulate crypto — which is something I personally welcome as it can shield users from bad actors such as FTX in the future,” said Dave.
Crypto exchanges such as Binance have come out with their proof of reserves to build back trust within the crypto community, and globally, regulators such as the Bank of England are feeling the heat to implement new laws.
“This is good for investors like me, it lets me feel more confident about the crypto industry. With the possible implementation of new regulations to supervise crypto assets, I do not see any need to stop investing in crypto assets,” he added.
In Singapore, the Monetary Authority of Singapore (MAS) proposed guidelines for crypto companies back in October, aimed to protect Singaporeans and ensure that businesses act properly when dealing with their customers and their assets, including providing relevant risk disclosures, and disallowing the use of credit facilities for consumers.
According to OCBC’s report, Gen Zs’ and millennials’ risk-taking appetite can also be attributed to their worries of retirement.
On average, Gen Zs and millennials in their 20s and 30s aspire to retire at 58 – a decade before Singapore’s official re-employment age of 68. In addition, they wish to retire lavishly, as compared to baby boomers and Gen X.
However, Gen Zs and millennials are concerned about whether these goals can be reached despite being relatively far from retirement — 62 per cent of those in their 20s and 56 per cent of those in their 30s worry that they will not have enough retirement funds.
Hence, many have resorted to crypto due to its reputation to yield high returns despite posing high risks.
“While I know that investments in crypto are risky, it is a risk that I’m willing to take,” said Adam*, a Gen Z who has made significant losses since he first started investing last year.
Citing the recent inflation and price hikes, he said that while he is on the path to retire with a sufficient amount of funds, he would rather retire with funds that would allow him to live comfortably and afford whatever he desires. This is why he turned to crypto.
“My chance at making a huge sum of money may be slim, but if I do, it will be worth every cent. I’ll be able to afford the lifestyle I want. It’s not a good chance, but it’s the best chance I have at attaining this lifestyle.”
Anna also alluded to similar beliefs. “I do believe I’m on track to retire with a sum of money that is enough for me to live comfortably, however, I believe that my investments in crypto can expand my retirement fund.”
“The world of crypto is moving fast, but it’s also important to remember that cryptocurrencies are high-risk investments that can be extremely volatile,” senior product specialist at robo-advisor investment platform Wealthfront Tony Molina told Select.
“First, assess your current savings and then decide what kind of risk you want to take on from there,” he advised.
While investing into crypto is lucrative, it is always important to ensure that you have the financial footing to support yourself and withstand the risks that come with investing in crypto.
Diversification is also important when it comes to investing, be it stocks, cryptocurrency or other assets. Some have lost life savings and resorted to suicide by betting their money on one medium of investment.
Through diversification, losses can be minimised and long term financial goals can be attained in the least painful manner, according to subject matter professionals.
Featured Image Credit: Bankrate.com
From Terra-Luna to FTX, the crypto contagion is upon us – is this the beginning of the end?
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