The next generation of investors are super online — instead of traditional investments, many Gen Z and young millennial investors, from teens to those in their early 20s, are bullish on cryptocurrency and the technology that surrounds it.
Some have spent the bulk of their savings on these type of investments: Nearly half of millennial millionaires have at least 25% of their wealth in cryptocurrencies, according to a new CNBC Millionaire Survey. More than a third of millennial millionaires have at least half their wealth in crypto and about half own NFTs.
Young investors have also taken part in recent meme stock rallies, which occur when retail investors buy up shares of stocks shorted by Wall Street hedge funds, like GameStop and AMC Entertainment. In part, the investors hope to force hedge funds to pay, overcoming what they see to be an inefficient system.
One reason young people have turned to alternative investments like crypto is simple: Many just don’t trust traditional investment institutions, as Allison Reichel, 23, tells CNBC Make It. They prefer to rely on their own research rather than use insights from traditional institutions, like financial advisors from legacy firms.
That includes Reichel herself. While working on her PhD in economics, Reichel is also a senior editor at crypto news site Blockworks in Washington, D.C. She started to invest “heavily” in crypto this year, and her crypto holdings account for most of her portfolio, she says. Reichel plans to hold her bitcoin and ethereum long-term.
But this distrust isn’t the only thing driving young people to invest in cryptocurrencies and meme stocks. First, many have a genuinely positive outlook on blockchain technology. And second, at the same time that they feel disconnected from traditional investments, many are finding community, and sometimes fun, in the crypto space. They want to invest in what they connect with, whether it be stocks, coins or digital assets.
CNBC Make It talked to several Gen Z and young millennial investors, like Reichel, about how these factors impact where they choose to put their money, and why they’re still investing with caution.
“In any crypto, you have those super strong network effects where people believe in it so much that they’re like, ‘I’m never selling because I believe it’s the future of finance,'” Reichel says. “I see the long-term applicability and use of crypto,” she says of her own plans to hold.
That’s true of many young investors, who believe in the technology itself.
While doing research for her PhD, Reichel was inspired by how bitcoin was being used to help those in need in different countries. In Venezuela, for example, crypto was a way that families could still receive money from relatives in the U.S. during a time when the president wasn’t allowing humanitarian aid.
Similar reasons led 23-year-old Kyla Scanlon to begin investing in bitcoin and ethereum during college in 2016. “I really liked the application that [bitcoin] has for people who are unbanked. My whole life thesis is, ‘How do we create financial accessibility and equality for everybody?’ I think crypto is one step in allowing people who don’t have access to traditional methods like banks to do so,” she says.
Scanlon first started trading options in…