The Rise of Financial Nihilism: Why Young Investors Are Turning to Crypto

Over the past five years, a significant increase in young people entering the cryptocurrency market has sparked a new trend in global investing.

A report from Crypto.com reveals that the number of global crypto investors surged from 432 million in January 2023 to 580 million by the end of the year, representing a 34% growth. This impressive expansion occurred despite global headwinds such as tightening financial policies and geopolitical conflicts.

Global crypto user numbers grew significantly in 2023, according to Crypto.com.

According to a 2024 Nasdaq survey, cryptocurrency is the preferred investment asset for both Gen Z (59%) and Millennials (57%). This research confirms that younger generations are increasingly prioritizing digital assets over traditional ones like stocks.

Furthermore, a 2023 Bitget study found that 46% of Millennials in major economies like the US, China, and Germany own cryptocurrency. This reflects a significant shift among young people from traditional investment channels to digital assets, driven by the desire for high returns and financial freedom.

Why the Shift in Investment Mentality Towards Crypto?

Economic and political events over the past five years have triggered a major shift in the investment mentality of young people. They are moving away from traditional investment channels and towards new opportunities in the crypto space. Financial nihilism has emerged as their response to a financial system they feel excluded from and no longer trust.

Gen Z and Millennials have held a significant amount of crypto assets in their investment portfolios since 2022, according to Investopia.

The Impact of the COVID-19 Pandemic (2020-2022)

The COVID-19 pandemic triggered a global economic crisis, resulting in widespread job losses and business closures. Governments resorted to printing money to stimulate economies, leading to rising inflation and a weakening of traditional currencies. This fueled wealth disparity, as financial aid primarily benefited large corporations and the wealthy.

The 2022 Credit Suisse Global Wealth Report revealed that the richest 1.5% of the global population held approximately 47.5% of global wealth. This highlights a significant imbalance in wealth distribution. Conversely, the lowest 39.5% of the population controlled only 0.5% of global wealth.

There’s a significant disparity in wealth distribution across different socioeconomic groups.

This disparity is even more pronounced when comparing developed and developing countries. A 2022 Chainalysis study showed a significant post-pandemic increase in crypto investors, particularly among those aged 18-34, driven by distrust in traditional finance.

Inflation and the Devaluation of Traditional Currencies

From a peak of 8.7% in 2022, global inflation has gradually decreased but remains high. While 2024 projections forecast a decline to 5.8%, this level continues to significantly impact economies.

Global inflation rates from 2019 to 2023, as reported by the IMF.

The chart above illustrates global inflation trends from 2019 to mid-2023, differentiating between Headline Inflation (including food and energy prices) and Core Inflation. The significant surge in headline inflation from mid-2021 to mid-2022, reaching nearly 15-20% in countries like Brazil and the US, underscores the erosion of purchasing power and the devaluation of fiat currencies.

This disproportionately affects young people, who often lack substantial savings and rely on current income. They perceive traditional financial assets as insecure and unable to preserve value long-term. Bitcoin, often viewed as an inflation hedge, has become an attractive alternative.

The Collapse of Financial Giants

The 2023 collapses of Silicon Valley Bank (SVB), Signature Bank, and First Republic Bank were the largest bank failures since the 2008 global financial crisis. These events triggered widespread distrust, particularly among young people, who witnessed the vulnerability of even “too big to fail” institutions due to mismanagement and lack of transparency. The downfall of Credit Suisse, a global systemically important bank (G-SIB), further intensified this sentiment.

The Russia-Ukraine War and Geopolitical Crisis

The 2022 Russia-Ukraine war created significant global financial instability. The geopolitical crisis impacted oil, gas, and commodity prices, leading to price increases and energy crises. Global stock markets reacted sharply with sell-offs, particularly impacting economies reliant on Russian oil and gas.

However, this event marked a turning point for the crypto market. Over $56 million in cryptocurrency donations supported Ukraine’s war effort in the first month. This demonstrated the practical application of cryptocurrencies during geopolitical instability when nations are cut off from traditional financial systems.

“The people of Ukraine are grateful for the support and donations from the global crypto community as we protect our freedom.”

Ukrainian government on Twitter, May 2022! Ukraine Appeals for SupportCrypto users worldwide donated to the Ukrainian government.

Bitcoin and other major cryptocurrencies became safe havens, similar to gold in past crises. Bitcoin’s price surged from under $30,000 in early 2022 to over $45,000 in March 2022 following the war’s outbreak.

The Rent vs. Buy Dilemma: A Generational Struggle

Rising living costs and stagnant wages challenge young people while stock and real estate markets continue to appreciate. Many Millennials and Gen Z are turning to crypto because they are priced out of traditional investments like real estate.

In Vietnam, housing prices in major cities like Hanoi and Ho Chi Minh City have skyrocketed, exceeding the affordability of most young people. Average apartment prices range from 50-70 million VND/m² (approximately $2,100-$2,900/m²). A 60m² apartment in Binh Thanh District, Ho Chi Minh City, costs around 3-4 billion VND ($126,000-$168,000).

Assuming a 70% mortgage with a 10% annual interest rate, monthly payments for a 3 billion VND apartment over 20 years would be 21-25 million VND ($880-$1,050). This represents 70-100% of a 20-30 million VND monthly income, excluding other living expenses. This illustrates the significant difficulty for young people in owning homes, particularly in major cities.

Ho Chi Minh City Real Estate PricesReal estate prices in Ho Chi Minh City have consistently trended upwards.

Renting in major cities is also challenging. Rents for one-bedroom apartments in central districts range from 5-15 million VND ($210-$630) per month, while higher-end areas command even higher prices. This further limits saving opportunities and exacerbates the struggle to accumulate wealth for future homeownership.

Financial Nihilism: Rebellion and Redefinition

Financial nihilism thrives as a rebellious response to traditional financial models, coupled with a desire for financial freedom through high-risk acceptance. The internet’s explosive growth and global interconnectedness have catalyzed a significant shift in mindset among young people compared to pre-2008. They have unprecedented access to success stories and investment opportunities due to the “flattened” global information landscape.

This nihilism transcends mere skepticism of traditional assets; it embodies a defiant challenge to outdated financial systems. Young people believe financial freedom is attainable through calculated risk-taking. They are willing to “experiment” with speculative opportunities, yearning for “life-changing” gains.

“Financial nihilism embodies a shift in modern investment psychology, especially as speculators seek opportunities in a volatile financial world.”

Bitcoin’s volatility, rapid profit potential, and independence have made it a prime candidate for financial nihilism. Memecoins, another facet of the crypto market, exemplify how investors are disregarding conventional investment wisdom. This highlights a breaking point with traditional finance and the rise of a new investment wave.

These assets represent a paradigm shift in financial value perception. Bitcoin and memecoins embody a “meaningless” approach, defying market norms. They represent a desire to escape governmental and institutional financial control. However, the downsides of these choices warrant careful consideration.

Conclusion: Financial nihilism is not a fleeting trend; it reflects a new generation of investors seeking alternative investment approaches and accepting significant risks in pursuit of returns.

Bitcoin: A Symbol of Shifting Investment Trends

Bitcoin, launched in 2009, has become a symbol of changing perceptions of asset value. Initially conceived as a decentralized payment method, it has evolved into an investment tool and a hedge against inflation. Its market capitalization exceeding $700 billion by the end of 2023, according to CoinMarketCap, demonstrates investor confidence in its potential.

Financial nihilists view Bitcoin as a way to “break the rules,” escaping traditional financial constraints. Without complex banking regulations or governmental oversight, they can directly control their assets without fearing inflation or institutional interference.

The number of BTC holders is steadily increasing, according to Crypto.com.

Interestingly, young people increasingly perceive Bitcoin as a movement against injustice, a challenge to the existing financial system. A Pew Research Center survey found that 46% of Americans under 30 believe Bitcoin could potentially replace the USD in the future.

This reflects a generational shift in perspectives on currency and asset value. They yearn for the financial freedom and independence from governments and banks that Bitcoin promises.

Conclusion: Bitcoin symbolizes the pursuit of financial freedom and exemplifies financial nihilism, where value is no longer defined by traditional rules.

Further Reading: Is Bitcoin the Perfect Solution to Inflation?

Memecoins: Reflecting High-Risk Speculative Trends

Within financial nihilism, memecoins epitomize the disregard for financial norms. Investors prioritize short-term price appreciation over intrinsic value. This very “meaninglessness” attracts young investors.

Investor interest in memecoins remains consistently high, with periods of explosive growth.

In 2024, the memecoin market experienced a resurgence, becoming one of the most profitable sectors in cryptocurrency. CoinGecko reported that memecoins yielded the highest average returns at 1,312.6% in Q1, surpassing Bitcoin and altcoins. This demonstrates the growing allure of memecoins, attracting both individual and institutional investors.

Memecoin growth significantly outpaced other crypto market segments in Q1 2024.

The memecoin market’s total capitalization reached approximately $60.93 billion in April 2024. Coins like Dogwifhat and Brett experienced impressive growth, with Brett reaching a 7,727.6% return. Solana’s “memecoin hub” contributed significantly, with a $6.6 billion ecosystem value facilitated by token creation tools like Pump.Fun.

However, memecoin risks are substantial. Chainplay reported that 97% of memecoin projects failed in 2024, with an average lifespan of one year. This highlights the high volatility and speculative nature of memecoins, leading to significant losses for many.

Despite 55% of memecoins being linked to fraudulent activities, 60% of new investors still include them in their portfolios.

Further Reading: The Landscape of Memecoins: Culture, Chance, and Attention

Betting on the Future: “Financial Freedom” or “Financial Ruin”?

Amidst challenging economic conditions, with rising inflation and living costs outpacing income, many young people face significant barriers to achieving financial freedom through traditional investment channels. A Pew Research survey indicates that 75% of young people feel current economic conditions hinder their financial stability, prompting them to seek alternative solutions.

Moreover, a “YOLO” (You Only Live Once) mentality and “FOMO” (Fear of Missing Out) drive investment in highly speculative assets like memecoins. The interest, growth, and returns from these assets demonstrate a significant shift in young people’s investment approach. They equate memecoins with financial nihilism, showcasing a risk-taking approach often lacking a strong knowledge foundation. This choice could lead to financial freedom for a lucky few, but for most, especially those lacking deep knowledge, it risks “financial ruin.”

Conclusion: While memecoins and other crypto assets might offer a path to financial freedom for some, their inherent risks can lead many to financial hardship. Informed choices and sound investment knowledge are crucial to prevent “financial freedom” from turning into “financial ruin.”

The Downside of Opportunity: Where Investors Converge

The current crypto market presents a complex landscape with strong youth participation. Gen Z and Millennials drive cryptocurrency adoption but also introduce significant risks. Driven by “FOMO” and hopes for quick profits, many lack blockchain knowledge and effective risk management strategies.

A CNBC report states that 70% of new crypto investors lack a solid financial foundation, relying primarily on speculation. This makes them vulnerable to market volatility, as exemplified by the 2022 Terra Luna collapse that wiped out many young investors’ savings.

Generations across the market seem to find crypto quite confusing…

More concerningly, these investors are susceptible to fraudulent projects. Lacking understanding of blockchain, memecoins, or new tokens, they are easily lured into “pump and dump” schemes, leading to substantial losses and negative perceptions of the crypto market as a “scam.”

However, the crypto market’s nature is not inherently fraudulent but rather reflects investor inexperience and the market’s relative immaturity compared to heavily regulated traditional markets. This allows for exploitation by bad actors.

Chasing short-term trends in the crypto market undermines its sustainability. The rapid rise and fall of memecoins exemplify this. While sudden price surges can generate significant profits for some, most lose when the market corrects. This highlights that not everyone can be a winner.

Moreover, the pervasive social media narrative of 100x or 1000x returns on memecoins often obscures the reality of illiquidity and the challenges of successfully executing such trades.

A Reddit post discusses the realities behind turning $8,000 into millions in the memecoin market.

Unlike heavily regulated traditional financial markets, the largely unregulated crypto market allows for price and capital manipulation by “whales,” disproportionately impacting small investors.

Traditional financial markets’ centuries-long development underscores the importance of long-term investment strategies over short-term speculation. Successful investors like Warren Buffett and Charlie Munger emphasize patience and long-term investment. In contrast, the crypto market’s volatility makes trend-following investors vulnerable.

From both traditional and crypto perspectives, knowledge and strategy are crucial. Participating in the crypto market is not inherently negative, but investors need sufficient knowledge and risk awareness. Combining crypto opportunities with traditional risk management principles enables asset protection and sustainable profit generation. Good luck navigating the crypto market!