A recent United States Financial Industry Regulatory Authority (FINRA) survey revealed that 31% of first-time cryptocurrency investors were swayed by friends’ suggestions and the pervasive Fear of Missing Out (FOMO) on potentially lucrative opportunities. This social element of crypto investment does not seem as prevalent in traditional markets, such as stocks and bonds, where friend suggestions accounted for only 8% of first-time investors.
While the allure of starting with small amounts attracted about 24% of respondents into crypto, the study showed that this aspect is not exclusive to digital assets, as similar numbers are recorded for equities and bond investors. Despite this, the increasing influence of friends cannot be underestimated. The survey found that nearly half (48%) of crypto investors obtained their market information from friends, family, or work colleagues, compared to just 35% for stocks.
Adding fuel to the FOMO fire, social media played a significant role in disseminating information, with 25% of crypto investors turning to these platforms as their main source of cryptocurrency news. Interestingly, these new investors were found to be younger (averaging 37 years old) and less college-educated (28.5% with a four-year degree) than their traditional market counterparts (43 years old and 46.3% with college degrees).
It’s worth noting, however, that this study revealed a concerning lack of knowledge on the part of new crypto investors. Participants scored an average of 26.6% on a five-item quiz assessing their understanding of cryptocurrencies, including matters of trading, taxation, and susceptibility to fraud. This brings into question the quality of information being shared among friends and on social media platforms.
Despite the survey’s small sample size of 465 participants and a 6.75% margin of error, these findings shed light on the potential pitfalls of social investing in the crypto sphere. While there’s something to be said for the excitement and passion brought on by friends and FOMO, investors must be cautious and consider the importance of accurate information to avoid costly mistakes.
In conclusion, although the current social investment trend is undoubtedly driving interest and activity in the cryptocurrency market, it is essential for both novice and experienced investors to weigh the pros and cons associated with such phenomena. A well-informed, educated approach to investment may prove more beneficial in the long run, holding the key to truly harnessing the potential that cryptocurrencies and blockchain technology offer.
Source: Cointelegraph
https://cointelegraph.com/news/friends-and-fomo-pushed-newbie-investors-to-buy-crypto-in-2022-survey
