Why is crypto so popular?

Whenever I ask anyone if they invest, the most common answer I hear is ‘I have a bit of crypto’. Even I bought some bitcoin and Solana during covid…

Everyone was talking about crypto as it was performing well at the time, so it got many people interested in this novel way of potentially making some money 🤑.

It seems that crypto is a more accessible investment product for many of us, but what is so appealing about it and why do people invest in crypto more than something like the stock market?

Crypto is the investment of the young

Google trends report on cryptocurrencies vs other investing terms shows that people are way more interested in crypto and bitcoin compared to more traditional investments like stocks and shares.

Crypto has resonated especially with the Gen Z generation as this is the most common investment type for this group. It’s not surprising as this generation has grown up with social media and rapid technological change 💻.

Millennials have also been keen crypto investors despite displaying cautious behaviour towards investing. So why are we investing in the most risky kind of assets when we are so risk prone towards more regulated investments like index funds?

Is it because social media made it popular, educated us about crypto and made it something we can all understand? Or is it our mistrust of banks and governments? Or perhaps it is the thrill of getting the next doge coin right and making a lot of cash quickly?

Whatever the reason, it’s clear we are open to taking far greater risks with our money on crypto, but is there a better way?

Could crypto make a great investment for the future? It’s difficult to say, especially because it’s so new to us and it doesn’t have a long track record like the stock market. It isn’t that well regulated yet either, but what if we invested in crypto differently?

The way most people currently invest in cryptocurrencies has many similarities to day trading or betting - buying and selling frequently and trying to guess which coin will do well in the short term.

Not only this method is super risky, it’s also incredibly hard to succeed in (just like trading individual stocks), but what if we used sound investment principles to invest in crypto as well?

Here are some of the key ones I would look at:

💡Using dollar cost averaging (buying small and often)

💡Not overtrading

💡Investing for long term

💡Diversifying

💡Only allocating a small percentage of your total portfolio

This could be a better way to invest in crypto for the long term, but then it might just lose the appeal of why people got attracted to it in the first place 🤷‍♀️.

To me it’s still too volatile and that’s why I choose index funds to build my wealth. Perhaps it could be a fun investment experiment after all, but I would only ever invest a very small proportion of my total.

👉 If you invest in crypto, let me know why and how you do it. I would love to hear your thoughts for a future post!

My weekly recommendation

Since we’re talking about crypto, this recent episode from Damien on Making Money Podcast has really opened my view on cryptocurrency.

There are very few people who talk about the more sensible approach of investing in crypto.

Until next time ✌️

Lina at Money Blues

Please note that crypto is extremely volatile and this newsletter does not recommend in any way to invest in it. Always do your research and due diligence on any types of investments.