Crypto Investing: A Socially-Influenced Phenomenon or FOMO Frenzy? Uncovering the Dynamics Behind Newcomers’ Entrances

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A recent survey by the US Financial Industry Regulatory Authority (FINRA) discovered that new cryptocurrency investors tend to be driven by the advice of friends, rather than well-researched decision-making processes. The study highlighted that 31% of new crypto investors were influenced by friends’ suggestions, compared to only 8% of first-time equities or bond investors. This raises the question: Is the crypto market primarily driven by a socially-influenced phenomenon, or is it an unfolding FOMO frenzy?

The ability to start with small investments was the second most popular reason for entering the crypto market (24%), similar to equities and bond investors. However, around 10% of respondents admitted that the fear of missing out on a potentially lucrative investment opportunity was their primary motivation. These statistics suggest a blend of social influence and FOMO at play in the crypto market, especially among new entrants.

Additionally, the survey revealed that 48% of crypto investors received information about the digital asset market from friends, family, or colleagues, compared to 35% of stock investors. Social media played a considerable part too, with 25% of the respondents using it as a source of information about crypto investments. It indicates a significant reliance on peer-to-peer knowledge transfer, as opposed to more traditional, regulated channels.

The demographic differences between crypto and stock investors offer a fascinating insight. On average, new crypto investors were younger (37 years old) and less college-educated (28.5% completed a four-year degree) than stock investors, who averaged 43 years of age and had a higher college completion rate (46.3%).

Concerningly, the survey also revealed that digital asset owners did not know as much about cryptocurrencies as they initially thought. With an average score of 26.6% on a cryptocurrency knowledge quiz, it is evident that many investors enter the market with insufficient information.

The survey’s findings point to a potential conflict between the socially-influenced nature of crypto investments and the glaring lack of fundamental understanding among investors. With both social influence and FOMO as significant drivers, there is a need for proper education and guidance to ensure newcomers make informed decisions in the rapidly-evolving crypto landscape.

As crypto enthusiasts, it is our responsibility to help newcomers understand the technology, markets, and safety measures associated with investing in digital assets. Building trust and community support are essential to harness the true potential of blockchain technology and cryptocurrencies, acknowledging the potential risks and pitfalls that lurk behind every investment decision.

Social influence and FOMO drove crypto investors in 2022

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