Cryptocurrency, Gen Z and the Future of Finance
Memes, shitcoins and fiat.
Sounds like nonsense?
Keep up with the kids!
Google searches for cryptocurrency terms are on the rise (again!) after officially peaking this year in late May. Largely driven by Gen Z culture, young investors are pouring their cash into digital coins in hopes of getting rich.
But capitalism isn’t the primary reason for the popularity of crypto among Generation Z. Ethics and social concern are two key functions of the DeFi world that play a role in it’s high demand.
Exploring the behaviour of Gen Z investing decisions is incredibly important as Gen Z behaviour is shaping the future. Keeping up with these trends will be the difference between Fintech startups who succeed and those who join the 60% of startups who fail within their first three years.
The Problem with Traditional Investments
Unlike previous generations, Gen Z don’t have the patience to wait for their investments to mature over the coming decades. We want to get rich quick. Traditional investments, such as stocks, shares and real estate are simply underperforming in this category. So we’ve turned to crypto.
The novel nature of crypto satisfies our investor motivations. Gen Z cites ‘the challenge’ and curiosity as more important reasons to invest than saving for retirement, for example. Without the desire to create financial security, young investors are more comfortable with risk. In fact, the FCA have highlighted their concern in our high risk methodology when choosing investments.
The other key concern with traditional investment opportunities is capitalism. Young liberals turn their noses up at generational wealth and reject the idea of the 40+ years at a 9-5. That's the boomer mentality. Young workers are taking back the power from their employers and creating better working terms. And companies can’t exactly say no, we’re experiencing “the great resignation” after all.
Whether you like it or not, this is the future of fintech. Your marketing strategy will have to change to conform to these ideals in order to survive. Your messaging will play a huge part in connecting with this new generation of investors, and could decide how successful your Fintech will be.
Popularity of Cryptocurrencies
Let’s start with the facts: 25% of all students have invested in cryptocurrency. It’s a huge proportion, with under 40s making up 94% of all crypto investors.
Why is crypto currency so popular among the younger generation?
DeFi
DeFi stands for decentralized finance. It refers to the blockchain (stay with me!), which is an inclusive platform for financial products in the public domain. The blockchain is a software network designed to remove the intermediaries between transactions.
How does this all relate to Gen Z crypto investing trends? Well, DeFi makes it possible for anybody and everybody to access the tools that could help you grow your wealth. It does not discriminate, which plays into the core values of the younger generation of investors.
DeFi also plays into the mobile-first nature of young investors since assets are purchased using smart contracts. These are automated agreements and don’t need the same level of admin or paperwork that traditional investments require.
ESG Crypto
ESG investments are those that qualify as environmental, social or governance-focused. Investments stamped with ESG approval have gone through tough regulatory measures to avoid false pretences like greenwashing.
I’m highlighting ESG in particular because 95% of young people (millennials included) are interested in making responsible and sustainable investing decisions. It’s one of the top priorities for Gen Z, with 86% of students preferring an ethical bank over one that offers a financial incentive to switch.
While there is concern about the environmental effects of Bitcoin mining, many cryptocurrencies are mined with renewable energy sources in order to keep investor values in mind. Today, 40% of all cryptos are created this way.
One great example of an ESG cryptocurrency is Telos. It’s governance model is known as Telos Decide, and gives investors the power to vote on changes in legislation, grant funding and community initiatives. Telos strives to be the definition of truly democratic and equitable.
Meme Stocks
While I can’t exactly explain it, we, as Gen Z, operate somewhat ironically. Taking life seriously feels cringe. Plus, the never ending climate crisis means there’s already enough to get down about in the world- if we don’t laugh every so often, we’ll cry.
Remember the rollercoaster of Gamestop in January 2021? Amateur investors decided to get one over on short-selling investors who had ruled for too long. Thousands of individuals decided to buy shares in Gamestop to increase demand and skyrocket the share price. It meant that short sellers would owe huge percentages when later buying back the shares.
This whole process was largely driven by amateurs on Reddit, of which 45% of users are between the ages of 18-29. It highlights Gen Z’s neglect of profits to instead prioritise levelling the playing field.
This sums up the concept of meme stocks and meme cryptos. They are characterized by short time gains and falls in price in order to both :
benefit a large group of investors ‘in the know’ and
impede the traditional winners of the stock market game
Capitalising on meme crypto involves aligning your values with that of Gen Z and simply rolling with the punches. In fact, being transparent and honest about your intentions as a Fintech is likely going to be the best way to attract investment by Gen Z. We hate sneaky marketing tactics, and prefer that you trust our open-minded nature.
If all else fails, just tell us about your focus on environmental, social or governance systems. There’s a good chance we’ll back you.
This post first appeared on LinkedIn- click to read.