As traditional means to wealth such as stable pay rises and sky rocketing property values vanish for young people, more Gen Zs are getting creative with their long-term strategies for obtaining wealth.
“This generation has a lot of concerns about debt and finances… and feel that everything financial is harder for them than it was for previous generations,” Kathy Sheehan, SVP at Cassandra, a division of Engine, told Business Insider.
“Couple that attitude with more of an appetite for risk, it is not surprising that they are hoping for a quick fix or return.”
Enter crypto, NFTs and meme stocks.
Just in case you’re not familiar, here’s a little overview:
- Cryptocurrency: Crypto is a form of digital currency that doesn’t have a central issuing or regulatory authority (such as governments or banks) and uses cryptography to secure transactions.
- NFTs: NFT stands for non-fungible tokens. They’re unique digital assets that mimic real-world objects such as art, music, gaming and other digital collectibles which are bought and sold online over blockchain platforms like Ethereum.
- Meme stocks: Meme stocks refer to the shares of a company that have gained a cult-like following, often through going viral on social media platforms like Reddit, Twitter and Facebook. They tend to skyrocket in price for a short period of time before plummeting.
Okay, back to it.
So chances are, you’ve heard a young person in your life raving about DeFi (decentralised finance) which comprises emerging digital financial infrastructures such as cryptocurrency and NFTs. In fact, according to a 2021 study by personal loan company Stilt, Gen Z and Millennials dominate the DeFi scene, making up a whopping 94% of crypto owners.
But why is it so popular with Gen Zs?
There are several reasons.
Firstly, Gen Z are the world’s first digital natives, which makes them more comfortable with investing digitally than older generations.
Secondly, Gen Zs have watched many collectors, artists and traders become eye-wateringly rich overnight, convincing 56% of them that investing in crypto, NFTs or meme stocks can make them a millionaire.
And on the share market it’s now been found that people aged 19 to 24 account for one in four investors who began putting money into the sharemarket in the past 12 months, according to the 2020 ASX Australian Investor Study. Many Gen Zs see it as a chance to channel their inner ‘robin hood.
Take the GameStop saga, the world’s first ‘meme stock’, where Reddit users began frantically buying the company’s shares up to drive up stock prices that had just been shorted by hedge funds.
Nothing like the thrill of sticking it to the man, right?
But is the risk worth the reward?
Well, opinions are mixed.
Some experts like David David Golumbia, an associate professor at the Virginia Commonwealth University who penned ‘Cryptocurrency is Garbage. So is Blockchain’ say no.
‘I think cryptocurrency is a giant Ponzi scheme and people are getting ripped off like crazy,’ he says. ‘(though) I try not to deny that some people may benefit along the way.’
Golumbia’s biggest problems with DeFi?
On the one hand, crypto has a serious wealth distribution problem – for example, just over 2 thousand crypto addresses control 7.9 million bitcoins (that’s close to half the bitcoins in circulation).
Another negative is that the systems work in a similar manner to gambling (unless the trader has expert knowledge in the area). Investor Place, however, argues that therein lies the secret to making money.
Of course it can also be the not-so-secret way of losing it.
But the advice for young people who are trying to get rich off cryptocurrency, NFTs and meme stocks is simple. Invest in what you know about, don’t invest money you can’t afford to lose, and don’t take tips from friends or finfluencers off TikTok or Instagram without doing your own research first.