A recent survey by the United States Financial Industry Regulatory Authority (FINRA) Investor Education Foundation has revealed that influence from friends and the fear of missing out (FOMO) were some of the main reasons investors began to buy cryptocurrency for the first time in 2022. In fact, a large portion (31%) of new crypto investors cited friend suggestion as the primary reason for their foray into the digital asset market.
This figure is notably higher compared to only 8% for first-time equities or bond investors, potentially indicating that there is a social element to cryptocurrency investing that is not evident in equities or bond investing. Furthermore, the ability to “start with small amounts” was the second biggest reason for making a move into the crypto market at 24%, a similar percentage to equities and bond investors.
In addition, around 10% of respondents indicated that a fear of missing out (FOMO) on a “potentially lucrative investment opportunity” led them to buy cryptocurrency for the first time. Interestingly, the survey also found that newer crypto investors were slighter younger on average (37 years old) and less college-educated (28.5% completed a four-year degree) compared to stock investors (43 years old and 46.3% with college degrees).
The influence of friends and FOMO on new crypto investments is further supported by the fact that 48% of digital asset investors said they sourced information about the market from friends, family, or work colleagues, compared to 35% for stock investors. This was followed by social media as a source of information at 25%.
However, the study found that digital asset owners may not know as much about cryptocurrencies as they initially thought. The survey participants scored an average of 26.6% on a quiz consisting of five questions related to cryptocurrencies, such as how they are issued, transferred into US dollars, taxed, and how transactions may be susceptible to fraud.
Despite the potential influences of friends and FOMO on new investments in cryptocurrency, it is crucial for new investors to thoroughly research and understand the digital asset market before jumping in with both feet. As the survey results suggest, engaging with reliable sources of information and developing a well-rounded understanding of the market can greatly benefit investors as they navigate the sometimes volatile landscape of cryptocurrencies.
Additionally, it is essential for new investors to consider factors such as their risk tolerance, investment horizon, and financial goals before diving into the world of digital assets. This may help to mitigate the potential for FOMO-related poor decision-making and encourage a more thoughtful, strategic approach to investing in cryptocurrencies.
In conclusion, the survey by FINRA Investor Education Foundation highlights the growing social and FOMO-driven aspects of cryptocurrency investing, particularly among younger and less-educated investors. As the market continues to mature and evolve, it will be interesting to see how these influences might shift or change in the future.
With the growing popularity of cryptocurrency investments, it is more important than ever for new investors to ensure they are well-informed and making decisions based on sound market knowledge, rather than simply following the crowd. This not only helps to maximize the potential for success in the digital asset market but also helps to bolster overall market stability and confidence.
